A lot of people really want to know if it is possible to get a homeowner loan with bad credit because they are in that situation. If someone wanted to buy a property or invest in real estate but they have bad credit it’s still possible that they could get a loan and still buy a property but it is tough. In this article, I am going to give you three different strategies on how to go about it.
Work With a Loan Broker
Here’s the first one, you have to work with a loan broker or a mortgage officer that is brokering out to many different banks and is doing high volume. Let’s talk about why. If you go directly to a bank and you walk into the bank that you work at, they are always going to want to offer you and pre-qualify you for some type of homeowner loan. But the bottom line is that’s just one bank and not all banks are the same. They weren’t all created equal and they have different rules. So I recommend number one, going to a broker that works with 20 to 50 different banks. Now, they are not going to work with that many unless they are a serious operation doing high volume. So you may want to ask how many hundreds of millions of dollars’ worth of real estate do you broker out each year? If they give you a funny look like “are you crazy that’s a lot of volume,” that’s not your loan officer likely that can find the right option for you because there are banks out there that work with people that do have bad credit report.
What do you do if you Have Bad Credit?
The second thing I want to talk about is what do you do if you have bad credit to actually get it fixed. How important do you think credit is? Well, I mean in this day and age, it feels pretty important. How long do you think it would take to fix your credit? 8 years. But I believe it would probably take at least you know maybe a year. How do you fix bad credit? By paying your stuff on time. This strategy really comes down to doing some credit maintenance. Sometimes we’ve got hiccups, sometimes we’re late on a payment and then all of a sudden we say hey “I’ve got to get serious about qualifying for a homeowner loan.” Even if you’re using your credit to buy a lot of real estate, you’re going to need to do maintenance; so whether you call it repair or maintenance it’s good to find the company out there that you can trust. This is not one of those things where less is more, you are not looking for the cheapest program. You are looking for a company that has been in business for a really long time and has worked with thousands of clients and keyword is ‘attorney’. If an attorney is involved it’s more of a legitimate program and what they’re doing is they’re using a nice little strategy which is to find a good credit repair company.
But here’s the third thing… if you find a broker that doesn’t have a bank that can give you an option and if credit repair is going to take too long for your needs, then your third resort is to do seller financing. Seller financing is basically where someone else already has the house that you want and instead of selling it, they’re actually willing to finance you the house. Now, that’s really neat because they’re not a bank and they’ve got different criteria. They might ask for a little bit of a different down payment, they might ask for a higher payment. Seller financing is an amazing strategy for actually walking into the house that you want.
How do you find these?
What you do is you go through the paper, find the house that you want, typically seller-financed are not presented by realtors and so if you have a “for sale by owner” you can call them up and say “hey I’m not in a position to buy your house but would you rent it to me or would you do a lease option and work with me until I can buy it in a couple years because I’m doing a couple of things with my credit?” And there are a lot of people out there that are willing to do that and guess what, you’ve just negotiated yourself right past the bank by using the person that has the mortgage, has the bank, and boom you’re right into your house. Now, here’s the hidden strategy with this really great deal that if you seller finance yourself into a deal, you want to negotiate it where they’ll actually put you on title. Because if you’re represented on title for at least two years then after two years you can actually refinance onto the house.
Now think about that, you basically back-doored yourself into a super easy program that most banks will do because if they see you’ve been on title for two years then they’re going to say well why wouldn’t we let them refinance it. And qualifying for a refinance is way easier than qualifying for a purchase. So what’s the big moral of the story? Listen, if you’ve got bad credit, you got options. You can get a homeowner loan and you don’t have to wait and if you need to wait or feel like that would be the best option for you, then just focus on doing some credit maintenance and some credit repairs and stick with it.