How to Buy A House with Poor Credit
It seems that ‘unconventional’ real estate is finally catching on. I was pleasantly surprised to find an article on USAToday.com in its ‘Ask an Expert’ section detailing its advice on how to buy a house with poor credit. The individual had asked the following question to Steve Strauss, their resident expert, about real estate:
Q: Steve – It seems to me that with real estate prices so low, now is a good time to get into that business. Buy low to sell high! My problem is I don’t have great credit. So is real estate actually a good idea? And how does a guy in my situation get started? — Cal
How to Buy a House with Poor Credit | The Reply
Great question! Many homeowners have less than stellar credit and cannot purchase a house no matter how low the interest rates are. So how does one buy a house with poor credit?
You are what we call “the unconventional buyer;” you will have to be more creative.
Being an unconventional buyer means you simply cannot call up a real estate agent, drive around, find a property you like, and make an offer. You’ll probably have to find someone who will be willing to work with you and your situation.
How? Here’s the secret: You need to find an owner who is as motivated to sell as you are to buy. What you are looking for is someone who needs to quickly get out of a mortgage or whose property has been on the market for an extended period of time. There is no shortage of those these days, unfortunately. http://www.usatoday.com/money/smallbusiness/columnist/strauss/story/2011-10-17/unconventional-real-estate-buyer/50805660/1
And then he stops and talks about finding motivated buyers. Steven, so close to providing the solution. What is the reader supposed to do when they find a motivated buyer?
Although USAToday got the first part of the answer correct, I will go ahead and complete the answer.
How to Buy a House with Poor Credit | Assignment of Mortgage Payments System
If real estate transactions aren’t happening because banks aren’t lending, then finding an unconventional solution to conventional financing is the answer.
The answer to the dilemma can be achieved by utilizing owner financing.
Purchasing a home from a distressed homeowner while leaving the existing financing in place is the crux of what the Assignment of Mortgage Payments Systems is. It allows sellers with ‘unsellable’ houses (upside down mortgages, needs repair, can’t afford closing costs, etc…) to sell their home to ‘unloanable (Independent Contractors, business owners, less than stellar credit, etc…) buyers at market price.
When homeowners sell their houses to buyers who don’t qualify for conventional financing due to the strict lending policy of banks, it not allows a real estate transaction to occur at market price but also prevents a foreclosure from occurring.
This type of real estate transaction is a ‘win’ for all parties involved. The home owner is able to sell his or her house without going into foreclosure and ruining their credit. The buyer is able to purchase a home they otherwise would not have been able to. The bank, private mortgage insurance company, and HOA are all still receiving money on a performing note. The neighborhood is not seeing it’s values decreasing due to a foreclosure. Plus, fewer abandoned houses lead to less crime. State governments will continue to receive property taxes. Finally, tax payers don’t have to watch their government waste tax dollars on failed housing plans. Solving problems is the key to correcting the economy and the housing market. If the problem is the strict lending policy of the bank, then let the free market overcome by utilizing owner financing.
For more information on how to sell houses in this tough economy, please watch my free video series.
Image: graur razvan ionut / FreeDigitalPhotos.net
