I've been doing a lot of research but can't seem to find a definitive solution to my somewhat unique situation.

My wife and I own an investment property in PA (currently used as a short term rental / AirBnB) that's worth approximately $150 - 200,000 (prices have skyrocketed with the pandemic, so don't have an exact figure) and is fully paid off (no mortgages, liens, etc.) We live in a rented apartment in NJ.

My credit history is completely shot with a scores in the low 500's, several charge-offs and collections resulting from me going AWOL on all my debt around 5-6 years ago. I'm in the process of settling/paying things off but it's going to be a long process. I already have a solid plan of action and am working on this.

My wife's credit history is perfect except for the fact that it's relatively new ~4 years (she's relatively new to the country).

We file our taxes jointly and pay very little taxes as we're both self employed and write off a lot of things. We plan on writing off a lot less things this next tax year to show a decent income.

We have about $30-40k cash available to us for a downpayment.

We're looking at purchasing another investment property with the purpose of renting it out short term on AirBnB/VRBO in the same fashion as our current house. No particular property in mind at the moment, but generally looking at something between $100 - $300,000

Now on to the questions:

-Would it be possible for us to put our existing house up for collateral in a reverse mortgage, put down a decent down payment and get a mortgage considering our credit and income situation?

-Would my wife have a higher chance of getting a mortgage if she applies without me and with a co-signer?

-How much income do we need to show to increase our chances of getting approved in either scenario?

-Any other recommendations?

2 Answers 2


I am not in your jurisdiction (Canada rather than PA, US), but I have experience in risk management. With all due respect and best wishes for you as an individual to get ahead, I helped financial institutions design processes precisely to identify and reject applications like yours would be, as being excessively risky for the lender institution.

You do have equity, and presumably experience successfully running an investment property. Those are pluses.

However, your ability to make payments is (likely) suspect, given your income situation and your questionable credit rating.

More importantly, should there be another real-estate (mini)crash, you would be more likely than average to go AWOL on your debt again. I say this with no implied criticism; it would be very rational. You've done it before. You'd be overextended, with low (apparent) income and all assets in real estate, and an overhang of personal debt. You're not living in either property so you're not emotionally attached to them. So the moment you'd be financially upside down, your most rational course of action would be to cut and run, again. And the lender would therefore be at elevated risk of being stuck with an asset to try to sell at a loss to recover, compared to lending to a more typical borrower. So, sorry, reject this application and lend to someone else.

A mortgage broker on your side, in your jurisdiction, is better positioned to say exactly what would work best for you, where you are. Generically speaking, I'd say: get the existing investment property in your wife's name only; get her income up; apply in her name only; and settle your previous debts (maybe at the expense of "spending" your downpayment) so you're not a liability on her application. And be prepared to borrow from B-lenders at a higher interest rate to start. But ask someone local before running with that as a recommendation; especially the stuff on spousal financial situation for a one-spouse-only application is heavily jurisdiction-dependent.

Sorry to be pessimistic, but just calling it as I see it "from the other side".

  • Thanks for this - this is basically exactly what I thought, but figured there may be a "loop hole" I'm not considering!
    – Yev
    Commented Nov 26, 2021 at 17:13

Most people use the new house as collateral for the new loan, they don't get a mortgage on the first house for the down payment on the second house, plus get a loan for the second home.

You will have to sit down with a mortgage broker who works with loans for investment properties to see what options will work for you and your spouse. They will look at your required expenses, income, and credit histories.

Having no loan in the first property means that you do have options. There isn't a loan reducing the availability of funds on a monthly basis. Most of the rental income is profit once you pay for property taxes, insurance, utilities and the like.

Things that will hurt any mortgage application for either property will be your low credit score, and the monthly payments you are making to pay off your past debts. Being self employed makes any application even more complex because of the uneven nature of the income.

We plan on writing off a lot less things this next tax year to show a decent income.

I don't see how this will help. It appears that your plan is to not claim all your expenses, so it looks like your business are profitable, even though doing so will cause your to pay more state and federal taxes. The lender might wonder why if the business is so profitable, why you don't have more in the bank and why aren't paying off the past debt faster.

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