I need a loan to put an addition on a rental property. My credit is pretty bad but the additional rental income will cover the loan payments. Any?

Asked by Bay_area_ll, Oakland, CA Wed Dec 9, 2009

ideas where I should look for this type of loan?

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Inhouse Lend…, , 95125
Wed Dec 9, 2009
I would love to help you in this situation but this doesnt seem like a loan any lender would make based upon what you mentioned here. John explained it pretty well, but your last response i think puts it in more perspective. Ill try to respond based on the last comments.

You said "I have no job and one house in foreclosure."

Well this is not going to help you get any conventional loan at all. Hard money is the only option if this is the case. Stated income loans now days have almost the exact terms as hard money.

You said "The fact that I have one bad deal that trashed my credit should have no bearing on this deal."

Yes is should have a bearing on your credit it is now part of your credit history. Because you might have made a mistake does not mean that creditors should forgive you automatically. This is the reason why credit was made to determine our risk on paying back debt.

I need someone to actually look at the numbers on it's own merits to see if it makes sense. .

I dont really have to look at the numbers to see tell that you might not be the right candidate to apply and qualify for a loan. Even if you owned the rental free and clear and i had no care in the world about you and were securing the loan on the property value alone, i would still consider your ability to repay the loan. A hard money Lender will want an exit strategy usually. Meaning investors that lend hard money make money off the points they charge plus interest, in your case because its a rental property and non-owner occupied they are able to charge you more for the loan and are sometimes not subject to some predatory lending guidelines. In your case do you have an exit strategy, and because the rent will cover the payment what about the vacancy factor and the unseen dead beat renters. Without a job how will you pay the loan during this time? There are many variables to hard money because it has less rules doesn't mean its easier to obtain, i have found hard money investors to be just as smart if not smarter than a bank in most situations.

If you need a more detailed consultation feel free to contact me i have years worth of hard money experience, and can tell you right away looking at your specific scenario if any lender would entertain it.
1 vote
John J Dutra, , Fremont, CA
Wed Dec 9, 2009
Pretty bad credit will most likely keep you from getting a cashout investor loan. Both "casout" and "investor" are scary terms for lenders, so adding bad credit will most likely scare them off completely. That said, I have had people tell me they have bad credit and it is not so bad, but know that anything below 720 will make this a difficult loan to process.
So now what? Well, there are a couple of different choices out there for you. You mentioned that this is an investment property - so you also have a property that you occupy? Taking out cash on a property you own is easier than doing it on an investment property, so that is one option. Same with getting a line of credit. Lending on a personal residence is much easier and comes with a lower level of criteria.
You have Hard Money loans. If your current loan is low enough on the investment property (below 70% loan to value) a Hard Money may work.
Then, you can always work on your credit. Some things work faster and are easier to do than others when it comes to credit repair, so seek someone you trust and have them help you with that. Typical things that cause scores to drop (other than late payments or collections) are high balances on credit cards (anything over 50% will cause a drop in your score) and multiple inquiries on your credit . Those are quick fixes and can improve a score within a few months if done right. In fact, if you have them done today, by next month you can ask your lender to do a rapid rescore on your credit to see if the scores did rise to a point where the loan can be made. Good luck and Merry Christmas to you and yours.
1 vote
Al Akerman, Mortgage Broker Or Lender, Lakewood, NJ
Wed Dec 9, 2009
How bad is your credit? Do you know your score?
1 vote
Ruth and Per…, Agent, Los Gatos, CA
Mon May 17, 2010
Hi Bay Area 11

Sorry to hear about your issues. Yes there are a few in similar situation in the valley.

Even hard money lenders will have an issue lending as you have a home in foreclosure and no job.
The concern any Lender, Bank or Hard money will have is that you need a construction loan for your
rental. They are very hard to come by from a regular bank without 30-40% down; in your case there are 2-3 very significant other issues.

What you need is Private Equity, from Individuals and they will lend only if you have equity in your
Rental Property. Technically, they will want a stake or ownership interest.

Do give me a call at 408-656-5343 and we go from there.

Perry
Web Reference:  http://www.ruthandperry.com
0 votes
Bay_area_ll, Home Buyer, Oakland, CA
Wed Dec 9, 2009
Thanks for the advice guys. Well, my credit is pretty bad. I have no job and one house in foreclosure.

The fact that I have one bad deal that trashed my credit should have no bearing on this deal.
I need someone to actually look at the numbers on it's own merits to see if it makes sense. .

Maybe hard money is my only option.
0 votes
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