Buy Real Estate With No Credit
If you could buy real estate with no credit, would that Many people are reluctant to go into real estate because they may have bad or bruised credit. No one likes to be turned down or rejected. But what if you could buy real estate without having anyone check your credit? It’s easier than you think.
Four Ways To Buy Real Estate With No Credit
While there are more than three ways to buy real estate with no credit, these are the three main methods that investors use. Learning these methods will give you a good foundation to build your real estate business – with or without credit.
Wholesaling: Wholesaling real estate is one of the truest forms of the no money down deal. The process of wholesaling a house is simple…you (the wholesaler) finds a motivated seller and put their property under contract to purchase at a significant discount from retail. During your closing period you re-market the property to find a cash buyer willing to pay more than what you have the deal under contract for. At this point you assign your interest in the property to your end cash buyer for a fee which ends up being your profit as the wholesaler. Wholesaling has also been referred to as the “find and assign” method of investing.
Subject To: Another method to buy real estate without credit is to take title to a property subject to the existing debt. This means that you take over the seller’s payments but the loan stays in the seller’s name. You do not legally assume his loan, therefore there are no credit checks and you don’t have to qualify with the lender. Owners will more than likely want some assurances that payments are being made on time – after all, your payments will reflect on their credit record, good or bad. If someone is behind in payments, you are in a much stronger negotiating position. Keeping the loan in their name while you make the on-time payments can help the seller re-establish good credit.
If owners are leery about having the loan remain in their name for the entire length of the loan, you can add a balloon to the note, promising to get the property re-financed in five or ten years. If all your payments have been made on time, the owners may extend the subject to agreement. At the very least, the property will have gained in value, either through amortization or appreciation or both, allowing you to refinance into a new loan.
Lease Option: A lease with an option to buy is a very common way to buy real estate with no credit. You lease a property and take out an option to buy the property within a set time frame. During that period, you can build up your credit. But, while you’re doing so, you can also put money towards your down payment or the sales price of the property. If you decide to go with a conventional lender to finance out of the lease option, that’s fine. But we’re talking no credit deals here.
Several years of on time payments from you will lay a foundation of trust with the sellers. When the lease period is up, ask them what they would do if you paid off the balance owed on the property. If they are just going to put it in the bank, ask them if they would rather earn 5% to 7% from you rather than the 2% the bank is offering on CDs. Their money is secured by the property. You have a track record with them and they are getting a better return on their money. It’s an attractive package.
Owner or Seller Held Note: With the easy credit free-for-all that accompanied the real estate boom, owners and buyers fell into the path of least resistance – getting a new loan for each purchase. However, seller held notes never went out of style for those of us who are well-versed in creative real estate. Now that conventional lenders have tightened their purse strings, it’s time for everyone to become familiar with this technique.
It’s really quite simple. Instead of the buyer applying for a new loan, the buyer and seller write up a note for the sale price of the property less any down payment. A mortgage is written against the property to secure the note. A closing is held and title is transferred to the buyer. The buyer makes payments to the seller until the note is paid or until he pays off the balance of the note, the same as he would with a conventional lender.
Sometimes the owner doesn’t want to transfer title until all the payments are made. That’s understandable. In that case, the owner can create a Contract for Deed. When the buyer has made all the payments, a closing is held and title is transferred. Contract for Deed or Agreement for Deed is a very common method of owner financing.
Growing Interest In How to Buy Real Estate with No Credit
If you have bad or no credit, don’t feel like you are the only one. The collapse of the real estate market along with the “Great Recession” has put a lot of people in the same boat. In fact, more people have bruised credit than don’t. There is a growing trend of owner financing, rent-to-own and other creative methods designed to help home sellers and buyers create win/win situations.
Even when your credit is strong, you are better off using no credit methods to fund your deals. Doing deals “under the radar,” keeps your credit lines open for those deals that you can’t do creatively. Knowing how to buy real estate with no credit will serve you well throughout your real estate investing career.
