Larry needed to pay off a home improvement loan (and some other debt), and he wanted cash in-hand for additional home improvements. His credit score was 551. He had multiple charge-offs and collections, and his 2024 income was way down. The deal wasn’t up to his bank’s minimum criteria.
The Situation
Credit score: 551
Multiple charge-offs and collections on credit report
Mortgage payments current (no lates)
Needed cash-out refi to consolidate debt
2024 income severely reduced (took most of the year off to qualify for higher Social Security)
35 years at the same employer before taking time off in 2024.
80% LTV after cash-out
The Challenge
Larry’s bank didn’t do loans at this credit score.
Most lenders would reduce the qualifying income by averaging in the lower 2024 income with 2025 recent amount (or deny the loan entirely due to income fluctuation).
The FHA appraiser called out paint repairs, which couldn’t be done before closing because of the Michigan winter.
How We Structured It
FHA cash-out refinance using DU approved/eligible findings.
We used his long-term income history (35 years same employer) and disregarded the down year from 2024 as a temporary reduction
551 score was acceptable under FHA guidelines with AUS approval.
Charge-offs and collections didn't require payoff (mortgage history was clean)
49% back-end DTI after paying off debt with cash-out proceeds
We set up a repair escrow for paint (exterior work not feasible in Michigan winter).
He walked away with debts paid and $14,000 cash in-hand.
Why This Might Matter
Many banks/lenders have credit score minimums that prevent deals from closing.
Pattern To Watch For
Credit scores under 620 with on-time mortgage history
Charge-offs and collections that aren't currently being pursued
Temporary income reductions with solid long-term employment
Borrowers who need debt consolidation but don't meet your credit minimums
If you've got a client with slightly rough credit but they've been paying their mortgage on time and have decent equity, there's often a way to structure it.
Work With Me
Do you have a deal that doesn’t fit your credit policy but the client seems solid?
Reply to this email or call me at 616.298.2743 for a same-day answer.
What I Specialize In
HELOCs (complex income, credit issues, or property condition challenges)
VA loans with high DTI or non-traditional income
Low credit scores with compensating factors (equity, down payment, strong income)
Recent self-employment with documentable income
Non-QM and investor DSCR loans
Construction loans (especially investment property, FHA/VA construction, or large renovation projects)
What I Typically Don’t Do
Manufactured homes under $150K loan amount
Raw land purchases
Construction loans under $300K
One case study per week showing scenarios we’ve been able to help with