I Can Buy!

Buying a Home When You Have Bad Credit

2009-10-16T16:55:00.000-07:00

About I-Can-Buy.com

Have you tried buying a house but were unable to, because of bad credit?

Have you given up on buying a home of your own because everyone told you that you'd never be able to with your bad credit rating?

Well, I'm here to tell you-- DON'T GIVE UP! You CAN Buy a House, even if you have poor, bad, or terrible credit!

Escape the Rent Trap!

When you rent you throw all of those expensive payments away. And worse yet, you are giving them all to someone else. Who uses it to build equity in their real estate property. You get poorer while you pay someone else to get richer!

Why not invest that same money in a house that will grow in value? A house that YOU own!

Don't let bad credit keep you from buying a home of your own!

This website, "I-Can-Buy.com -- Buying a Home When You Have Bad Credit" can show you how you can buy a home with no credit check or loan approval.

Warning to Investors:

If you are looking for another "no money down" or "get rich quick in real estate" scheme, don't go any farther. This site is not for you! There are no slick sales techniques and fast talking ways to take advantage of people here.

On the other hand, some of the very same methods that expensive real estate investment "courses" are charging people hundreds of dollars to teach, are included in free on this site.

This website was made for the "regular guy," the ordinary person who, for whatever reason, is stuck with bad credit and maybe bad luck.

These are the kind of people who just want to own their own house, and were told they would never be able to purchase a home with their poor credit rating, because they can’t qualify for a home loan.

"I-Can-Buy.com -- Buying a Home When You Have Bad Credit" shows proven and legitimate methods that thousands of people like you have used for buying homes with no credit check and little to no risk.

Check out our website today and learn:

The secrets real estate investors are using to get rich off ordinary renters like you.
How owning a home will help clean up your credit.
Ideas on where to get a down payment when you are short on cash.
How you can buy a house with no credit check.
How to get a loan no matter what your credit is like.
How to find and buy lease-option and rent-to-own houses.
Information on agencies that will help you get into a house for free, and will even "give" you the down payment.
How to buy a house with little or no money down.
Secrets real estate agents don't even know on buying a home with no credit check.
A Dictionary of Real Estate Terms
Free Sample Real Estate Contracts and Documents
And much more...

At I-Can-Buy.com we believe that information should be available to anyone who wants and needs it, so we are giving this information away free, unlike our competitors, who get rich off of books, not real estate. This website will offer the information free in a format that is supported by advertising instead of book sales.

All this information for FREE! This information was in a top selling book, "Buying a Home When You Have Bad Credit" by Alexis Dey. This book was previously sold by Mohave Publishing, and will only be offered FREE for a limited time, so check the information out here today!

1. An Introduction: You can do it!

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It is possible to buy a house, even if you don’t have perfect credit or a huge salary. Don’t listen to the others who have told you that you’ll never be able to buy. There are many options available to you. Not all of them will be for you, but one of them may be just right for you now. Maybe one will be right for you later. But don’t give up. Keep a positive attitude and keep trying.

I’ve written this book to give you hope and get your creative ideas flowing.If you can’t get a conventional loan, you will need to get creative. And I have some creative ideas for you to consider.

There are also many different nonprofit and community organizations that you can go to for help. This is a great time to get into a home of your own. It has never been easier. Mary and Jake were told by a real estate agent and mortgage broker that it would take them 5 years or more to clear up their bad credit report enough to be able to buy a house. But, by using one of the methods in this book, they were able to buy a house within 3 months of talking to the real estate agent.

And what is amazing is that once you have a house, your credit gets better! You are making regular payments and you now have equity in a house instead of rent. Next time you buy, if you decide to sell your home, it will be even easier.

It is possible for anyone to do. Some of these ideas are secrets that investors have been using to get rich for years. But why should the rich and the investors know all the secrets. I wanted to make some of these creative ideas available to anyone who wants and needs to get out of the rent trap and into a home of their own.

I've watched countless others get into houses when they had bad credit. And I know how it works from personal experience because my husband and I have been where you are. We never thought we’d be able to get our own home, but we did it! And you can too! So, let’s get started.

2: Bad Credit-- Fixing the Problem

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Defining the Problem

Before we get you into your own home, first we have to ask, why you are having credit problems? Poor credit is nothing to be ashamed of. It is far more common than you may realize. Often it may not even be your fault, like Gerald and Lisa.

They invested five years and all they money they saved to start a small sign company. Then one summer someone broke into their business office and stole all the computers and expensive sign-making equipment. Unfortunately they did not have any insurance to cover what was stolen, so they had to takeout loans to replace the items so they could stay in business. It took them years to recover financially from that, leaving them with bad credit.

On the other hand, like Paul, some people make poor credit decisions. After Paul got his first card, shortly after graduating from college, he suddenly became flooded with offers for more credit, which he promptly took up. He wanted to show everyone that he was a success at his new career as a sales manager, so he filled up all his credit cards. Then he began the juggling game of “robbing Peter to pay Paul,” which only got him deeper in debt. He took out a consolidation loan to pay off all the cards and put the debts in one big payment, but the temptation of all the empty cards was too much for him and he filled them all back up again. He finally had to declare bankruptcy because he was so deep in debt it was beyond what he could ever pay off.

So, take a good look at what is going on in your life. Why do you have credit problems? Are you in debt because of circumstances beyond your control or is it a chronic situation? Are you still getting deeper into debt or are you fixing the problem? There is no point in getting a home of your own if you will just end up losing it.

Solving the Problem

The first step in getting a home is fixing any money problems you may have.

• Get a credit report on yourself and check out what is on it. (To getone go to www.free creditreport.com).

• If your credit needs repair, start work on it now.

• Do not get into any new debt.

• Live within your means. Make a budget and live by it.

• Cut up (or lock up) the credit cards, if they are a problem for you

• Start saving money. If you have poor credit, it is much easier tobuy a home with a down payment, than without.

There Are Many Sources of Help Available

For help clearing up credit and getting debt under control, see Consumer Credit Counseling Service at http://www.cccsintl.org. They provide budget counseling, educational programs, debt management assistance and housing counseling. There are also many local branches of this nonprofit organization. There may be one where you live.

Beware of some “for profit” organizations that will help you consolidate debts. Often they are very costly. Why go to them when you can get free reliable help from a respected non-profit organization like Consumer Credit Counseling Service?

Some other places to go online for more credit advice and help:

Warning—Watch Out For Scams!

If you are trying to get a real estate loan, consolidation loan or fix your credit, beware of advance-fee loan scams. They prey on people who needmoney and credit by guaranteeing you will get a loan or credit, but you mustpay before you apply.

According to the FTC (United States Federal Trade Commission):
“...if someone guarantees or suggests that there is a strong chance they can get or arrange a loan or other form of credit for you, it's against the law to ask you to pay- or accept payment - for their service until you get your loan or credit.

Here are some points to keep in mind before you respond to ads that promise easy credit, regardless of your credit history:

• Legitimate lenders never "guarantee" or say that you are likely to get a loan or a credit card before you apply, especially if you have bad credit, no credit, or a bankruptcy.

• If you apply for a real estate loan, it is accepted and common practice for lenders to request payment for a credit report or appraisal. However,legitimate lenders never ask you to pay for processing your application.

• Never give your credit card account number, bank account information, or Social Security Number over the telephone or Internet unless you are familiar with the company and know why the information is necessary.

• If you don't have the offer in hand or confirmed in writing and you are asked to pay, don't do it. It's fraud and it's against the law.”

For more information see The Truth About Advance-Fee Loan Scams on the FTC website at: http://www.ftc.gov/bcp/conline/pubs/tmarkg/loans.htm.

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3: Real Estate Basics

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Needs and Wants

Before you start looking for a home, figure out what you can realistically afford to pay per month. Check out the market in the area you want to buy. Find out what price houses are going for and what the payments are per month. Remember that you may end up paying a little more per month than someone with a conventional bank loan, so keep that in mind as you figure out what you can afford.

You are going to have to work harder to find a home you can get without a loan. You will have to shop around more. So, concentrate on your needs in housing before your wants. Make a list of the minimum that you will accept in a house. Only write down your essential needs. Do you have to have three bedrooms or can you make do with less? Do you have to have a two-car garage or will a carport do? Do you have to have a single story home for health reasons? How close do you have to be to a school?

Make a separate list of the things you want. Wants might include things like a pool or hot tub, a walk-in closet, wooden floors, a deck, or a certain type of architecture. It would be nice if you can find a home with some of your wants, but to begin with, concentrate on finding a home that meets your needs. Often many of these things can be added to a home later.

Also make a third list of things you absolutely do not want in a home, such as: too many stairs to climb, a fixer-upper, certain areas of town you dislike, a location too close to a freeway, or a location too far from the center of town.

You may not be in a position to be too picky. Perhaps you can make do with a smaller home for now, while you establish your credit and get equity in the smaller home. Then you will be in a position to trade that home in for a bigger home.

Re-establishing your financial footing is not as difficult as it used to be, but it is impossible if you attempt to buy more house than makes sense. Be conservative!

Arm Yourself With Knowledge

It is important to learn the business of real estate. The more you know, the better off you will be. I am including a dictionary of common real estate terms and sample contracts in the Appendix of this book. But don’t stop there. Read books on buying houses. Your local bookstore will probably have many books available on the subject, but if they don’t, your local library should. Follow what is going on in the Real Estate section of your local paper. The Internet has a wealth of free information on the subject as well.

And most importantly, know where you can go to get advice and help.

Location and Condition

It is possible to get a great deal for a fixer-upper home, but this kind of home is not for everyone. If you don’t have money or skills to put into repairs that might end up being costly, it is best to look for a home that doesn’t need so much work.

You might also consider homes that just need “cosmetic” work. These homes don’t need major repairs. They may look ugly to potential buyers, but a little paint, new carpets or some yard work will fix the place right up.

If you would rather not put any work into a home to start, nice homes in upper-class neighborhoods can be found just as easily, and sometimes easier than fixer-uppers. Investors often leave these alone because they can’t make enough money right away with them to make it worth their while.

A Real Estate Agent or Not?

A Real estate agent would normally be your first stop. Usually they are worth more than the fee they get paid from the sale. The problem is that if you have bad credit and need to do some creative financing, more often than not the real estate agent is not trained to handle that situation. They are trained in methods that make it easy for them to make a commission. A real estate agent is often the first to tell someone with bad credit to wait five years or more until their credit is better before buying.

If you can find a real estate agent who will work with you and is willing to get creative, great! More than likely, though, you won’t find that person. This is why you need to understand the real estate business. You will probably find yourself dealing directly with owners.

For Sale By Owners

The term for an owner who is selling the house on their own without listing it with a real estate agent is: FSBO (For Sale By Owner). As you talk to these owners, learn to be a good listener. Right now it is not about you, it is about them. Keep your mouth shut about what you want and try to find out everything you can about the seller. Why are they selling without a real estate agent? What is their motivation for selling? Often money is not their motivation. Perhaps they are selling for health reasons or because they have to relocate.

Some FSBO’s are not very motivated to sell. Perhaps a real estate agent told them their house is worth less than they want to sell it for, so they are patiently waiting to get more money. They may keep the “For Sale” sign up for years before selling. It would probably be best to avoid these people. They are not likely to work with you. Then again, it doesn’t hurt to ask.

Sometimes the seller just doesn’t want to pay the commission to the real estate agent. Maybe they are, or were at one time, a real estate agent. Maybe they don’t have enough equity in a house to pay an agent. Whatever the reason, ask why they are selling on their own.

What you want to look for is someone who is very motivated to sell and who has a problem you can help with. For instance, Josh and Karen are motivated sellers. Josh has been transferred to another city and Karen is staying in the old house until it sells. Unfortunately, they don’t have enough equity built up in the house to pay a real estate agent, since they only bought it two years ago. Josh has found a new house, but they can’t afford to pay two mortgage payments for very long. These are good motivated sellers. We will get into how you can help them, and yourself, later.)

Contracts and Lawyers

If you are not working through a real estate agent, you will need to know where to go for help. One of the first people to look for is a good real estate lawyer. I have included some sample contracts at the end of this book, but I recommend that you always have your lawyer look over any contracts you use. Depending on the state, real estate sales contracts found in books or office supply stores may not be sufficient for what you need. An in complete or misunderstood form can get you into a lot of trouble. A competent attorney can be well worth the price paid.

Often a settlement lawyer will hire a title insurance firm to make sure a title search is done. If not, you will need to do this.

Escrow Agents, Title Searching and Insurance

You will want to have a good full service title insurance and escrow company helping you with the closing settlement. It is important that the title of the property you are buying be checked for any problems such as liens, past due taxes, or other surprises such as co-owners.

An escrow agent will conduct the title search for you, as well as offer title insurance. Owner’s title insurance is a one-time fee that protects you against any surprises that may show up down the road after the initial title search has been done.

Appraisers

Often FSBO’s selling a home do not use a real estate agent because they want to get more money out of their home than the real estate agent thought they should list it for. The real estate agent is probably right. Agents are skilled at setting a good price a house will sell for in that market. Called a “comp” or comparative value, it is a price based on what other houses are selling for in that area. Many FSBO’s are selling on their own because they didn’t like the real estate agent’s “comp” price.

Some real estate agents will list a home anyway, for the price that the owner wants, even though it is too high. Then, six months later, when the house didn’t sell, the owner goes off on their own as a FSBO, thinking that the agent did not do anything for them.

If you are serious about buying a FSBO home and you want to find out how much the house is worth, consider having an appraisal done by a certified real estate appraisal firm. If the owner won’t pay for it, you may have to pay for it yourself. Then you will know exactly what the house is worth and if the owner wants too much for it. It will give you more bargaining power. And you can make an offer on the house contingent to what happens with the appraisal.

Remember, it might be worth paying a little bit extra for a home if you can get the terms you want from the owner, such as having the owner finance the house or using sweat equity for a down payment. Maybe this is one way you can give the owner what they want or need and help yourself too.

Home Inspectors

A home inspector can give you a comprehensive analysis of the house’s major systems and components. They are independent third parties so they are neutral in the buying process. If you have any questions about the condition of the home or what the seller is telling you about the house, it might be very well worth the cost to get the house inspected-- if nothing else, for your peace of mind.

When hiring home inspectors, look for licensed professionals. In many states home inspectors don’t have to be licensed. A Licensed Professional Engineer (PE) is an engineer, not just an inspector. If you uncover a problem and you don’t have a PE, you will just have to go out and hire one anyway. It might be a wise decision to start with a Professional Engineer if you suspect problems with the house.

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4: Improving Your Chances to Get a Loan

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How to Improve Your Chances to Qualify for a Bank Loan.

Before we get started looking at methods to get houses without qualifying for bank loan, first be sure you can’t get one. It may save you a lot of work, and it opens up more possibilities for home purchases and help from real estate agents.

You might be surprised to find that there are ways you can get conventional financing, even though you never thought you would be able to. More and more lenders are looking at people with less-than-perfect credit. Usually the interest rates are higher than average, but you get into a house. You can refinance later, after showing how you reliable you are making your monthly payments.

Here are a few suggestions to get mortgage companies to look at you. If this method sounds likely for you, try talking to a reputable home loan consultant, and see what your chances are. This would be one of the easiest ways to get into a house.

Can You Fix Your Credit Report?

You might find that your credit is easier to fix than you supposed. Have you seen a copy of your credit report lately? You are entitled to a free copy of your credit report if you have been denied credit, employment, or insurance within the last 60 days. If you were denied because of credit, the company should give you notice and give you the contact information for the credit bureau.

No one can legally remove accurate negative information from a credit report (no matter what those ads say) but you can dispute mistakes or outdated items for free. Request an investigation of information in your file that you dispute as inaccurate or incomplete. There is no charge for this. Ask the credit-reporting agency for a dispute form or submit your dispute in writing, along with copies of any supporting documentation. You don’t need a credit repair organization to do this. Everything a credit repair clinic can do for you legally, you can do for yourself at little or no cost.

Look into Special Loans for Bad Credit

Concentrate on those lenders who specialize in working with those who have had credit problems. Spending time (and money) applying to lenders who do not work with credit blemishes will accomplish nothing. If you have local sources that you know will consider such loans, take advantage of them. Other sources, available online, such as Lending Tree, have a large network of lenders nationwide, including those who have experience in dealing with credit problems.

Have a Home Telephone

If you have a telephone in your home and in your name, it helps increase your chances of getting a loan. Lenders worry about people who don’t havea home phone. I know that today a lot of people today use their cellularphones as their home phone, but a land-line still looks better. It shows stability and roots, at least to a bank. Live in one place for a while.Again, banks want to see that you have some stability. It helps if you have lived in one place for at least 6 months. If you have just moved, show that you lived somewhere before this for at least 6 months (and hopefully several years).

Have a Good-sized Down Payment

The larger the down payment, the better your chances will be to get a loan. (See “The 30/70 Rule” in the next chapter.) The more money down, the happier the bank is to work with you.

And if you can show that you have saved the money over a period of time, instead of borrowing it, it looks even better to some lenders. Not all lenders ask where you got the money, so if you did save it, be sure to point that out.

Show That You Have Good Character

Banks and lenders want to know that you are dependable and reliable. Show this when you talk to them by showing up to meetings on time, dressing nicely, and having your information organized. Have your bank account and credit card account numbers and financial information ready to show them.

It will help if you have someone you know write you a financial letter of reference, such as someone whom you borrowed money from and who you paid the money back to.

Be ready to show them any sources of credit you may have that may not be on your credit history, such as paying the cable or cellular bills regularly. Even information about a loan from a relative or friend that was paid back in installments and on time will help. Be ready to tell them how you will be able to pay this loan back.

Use Any Collateral You May Have For a Personal Loan

Maybe you have something of value that you can use for collateral for a personal loan. This might be a good way to come up with a down payment.

Some of the things banks will consider for collateral are:

Stocks
Bonds
Gold and precious metals
Other Real Estate, such as land
Vehicles
Furniture
Collectables

Have a Relative or Friend Co-sign the Loan

This is a time-honored way of getting a home. Often close relatives or friends will help someone they care about who is in need. Sometimes all it takes is to ask. You can also get someone else to buy the house for you and later be added to the mortgage and quit-claimed to the deed. Check your state laws on the subject.

Increase Your Income

Get a second job. This can just be for a while. The increase in salary may be enough to qualify you for a loan. Also it gives you extra income to save for a down payment or pay off debts and fix your credit.

Start a small home business to bring in extra income. Be careful there-- a small business can be costly to start and run, and may not bring in much income for a while. But it works for many people. Do your research before you start. Weigh the risks and advantages. For a good online income opportunity that we recommend, click here.

Ask For Help

Ask for help from your church, synagogue or other nonprofit organization. Some government programs and organizations will help you with financingor other housing options. (See the section “Look into Sweat Equity and Other Community Programs” in Chapter 6 for more information on this.)

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5: No Credit Required Options

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If you still can’t qualify for a loan, or would just prefer not to, here are some basic methods for buying a house with no credit check required. These are popular methods for buying with no credit check, and are used by home buyers and sellers everyday.

The 30/70 Rule

The 30/70 rule says that anyone can get a loan with enough money down. Often a bank will give you a loan no matter what your credit is, if you are able to put up at least 30% of the value of the home as a down payment.

The reason for this is that the bank has less to lose if you walk on the loan.They can probably get most or all of their money back if they have to sell the house. Plus, they know when you invest that much, you are less likely to walk away from the house, so it is a better risk for them all around.

You may be talking about a pretty high interest rate on the loan, because the bank may still be worried about the poor credit rating, but you do have the option of refinancing later on. Friends of mine, Rob and Melody, moved to town and needed a house. Because Rob was a pastor who wanted to start a new church, he and Melody had no current income and their past income was not steady. They did have a lot of equity in the home they had just sold. So they were able to find a loan, despite their situation, because they had at least 30% to put down. The interest rate was high, but after two years of good payments, they were able to refinance the loan at a much better rate.

Pick up an Assumable Loan

Sometimes a seller has a home loan that is assumable with no qualifying, which means that anyone can buy the house and take over the loan with no credit check. Keep an eye out for these. The majority of loans are not assumable, which means the buyer must apply and qualify to pick up the seller’s loan. It is about the same hassle and fees as applying for a new loan.

If you find someone who has an assumable loan, definitely check into it. The big questions are: what is the assumption rate (usually one point) and what is the loan interest rate? Hopefully low, but if not, you might still seriously consider it. You would probably have to pay higher rates to get a loan through a bank if you have bad credit, anyway. Remember that you will most likely have to give up something (price, terms, location...) to get something (a house with no credit check.)

To find assumable loans look for older FHA and VA loans. Veterans Administration guaranteed loans that originated before March 1988 and FHA loans originated before December 1, 1989 do not contain a “due on sale” clause and are fully assumable without qualifying. Unfortunately these are getting harder and harder to find. Many sellers have refinanced their loans since then, to take advantage of lower interest rates. Also, since the loans are so old, it takes a lot more money to put down and/or finance to finish the purchase. If you do find one of these, perhaps you can use one of the other techniques in this book to finance the rest of the purchase price.

The” Subject To” Technique

There is an investor technique out there called “subject to” or “sub 2.” In this technique the investor will find an owner who is totally distressed and ready to lose the property, but it has not gone into foreclosure just yet. At this point the investor involved makes up the back payments, takes over the regular payments for the seller, and gets the deed to the property. The loan stays under the old owner’s name. The investor gets the property and can do whatever they want with it-- rent, lease-option, or sell it.

The name comes from the contracts they sign (a “subject to” purchase agreement) that says the buyer gets possession of the home and will be making future mortgage payments.

This may be great for the investor, but the loan liability stays with the seller until the house is sold and although it is not strictly illegal, it is a breach of contract because it leaves the bank or mortgage loan holder in the dark. Most loans have a “due on sale” clause, so the bank can call a loan due when ownership of the home changes. That means that investors who do this kind of “assumption” take the risk that the bank will find out, and ask for all the loan money right then and there. If the buyer does not have the money, the house will go into foreclosure. This may not be likely if the payments are made, but it is risky and according to many, not ethical.

Loan Contract for Deed or Wrap Around Mortgage

One way to get around the newer restricted assumption VA loans is to use a Contract for Deed. This is very similar to a “Sub 2” except with VA loans it is legal and encouraged by the lender. According to the VA loan regulations:

"When a borrower sells on an installment contract, contract for deed,or similar arrangement in which title is not transferred from the seller to the buyer, this is not considered a 'disposition' and ... therefore does not require approval by VA or the loan holder prior to the execution of such an agreement.”

The lender also can’t charge the normal points, processing fees, funding fees, or change the interest rate. That’s a pretty good deal, and there are quite a few of these loans out there.

A Contract for Deed is a method of financing where the owner retains the title to the house until the buyer has paid the purchase price in full. The buyer takes possession of the property and can claim the benefits of ownership, including income tax deductions for interest and property taxes. Since this is not financed through a bank, how to qualify is up to the seller.

This is sometimes called a wrap-around mortgage because the new loan“wraps around” the old loan. The seller keeps the loan in his or her name and uses the buyer’s payments to pay on the existing loan. If the seller does not want to collect payments, the buyer can send them directly to the lender.

There is a sample Contract for Deed at the end of this book, but I suggest you have a competent attorney draw one up for you. A settlement attorney will hold the Deed to the property until the loan is paid off, the buyer refinances, or sells the property. The lawyer records the transaction at the county courthouse, but the buyer is not given full title to the deed until the loan is paid off. This is one reason it is important to get title insurance to be sure your ownership is protected, as well as the interest of the seller and the lender.

Wrap-around loans can be very flexible. They don’t have to follow the original contract. For example the sellers could have the contract for deed due in five years, so they will be able use their VA eligibility again at that time. The seller can also raise the interest rate to make a profit if desired. At first this sounds bad for a buyer, but remember that you can use this for bargaining to get something else you want and to make the idea of a wraparound mortgage attractive to the seller.

The Contract for Deed can be somewhat risky for the seller because the seller remains liable for the loan until it is paid off or assumed (by qualified buyer.) To protect the seller, some contracts state that if the loan is defaulted, all the buyer’s payments become rent and the buyer has no claim on the house. The seller can then evict the buyer as a tenant and take back the house. A contract like this makes it a lot more attractive proposal to present to the seller.

Have the Owner Finance.

This is one of the most common methods of buying a house without getting a bank mortgage loan. The hardest part is finding a seller who is motivated to sell their home this way. (I have some ideas on how to find one of these in a later chapter.) This is a good way for a seller to get a monthly income and still sell their house. This works well in a market where houses are not selling well. Perhaps the owners have a new home already and can’t afford the payments for two houses. Or perhaps the owner is elderly and would like a monthly income. There are many people who would benefit by “carrying the paper” on their home for you. They might not have even considered the option until you bring it up. If you end up doing this, go through an escrow company and lawyer to make sure the paperwork is done legally and to everyone’s satisfaction.

The Seller Carry-Back

This is really a combination of two techniques, Assumable and Owner Financing. If you find a seller with an old assumable loan there probably is a considerable difference between what the seller wants and what the old loan is. When you get the seller to finance what is left from the rest of the money owed for the house, it is considered a “seller carry-back.” This technique can also be used to buy a home with no money down, if the seller will hold a loan for the whole amount.

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6: Lease-Option and Rent-to-Own

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This is such an important way for people with no credit to buy a house, that it deserved a chapter of it’s own. This is probably the most common method used to get into a home by people who are unable to qualify for a bank loan.

The Lease Option and/or Rent-to-Own Method

The lease option or rent-to-own methods lets you rent the house now and buy it after you save. This is one of the most popular ways for people with no credit to buy a home.

A lease option is an alternative financing option that allows home buyers to lease a home with an option to buy. Each month's rent payment may consist of not only the rent, but also an additional amount, which can be applied toward the down payment on an already specified price.

You might have to get a conventional loan eventually, but it will get you into your own house now, and buy you time to save money or slowly build your down payment, earn equity, and clean up your credit.

Actually, sometimes it is a better deal to rent-to-own than to get a bank loan. For instance, Carol and Bob found a home in a good neighborhood that had been vacant and on the market for 8 months. The asking price was $125,000. They made the desperate and frustrated out-of-state owner an offer that they would lease the house for five years with half of the $1000 rent payment going towards the down payment of the house. They would then purchase the home for the remainder of the asking price of $125,000. At the end of the five-year period, they had $30,000 in equity as a down payment for the house.

If they had taken a conventional thirty-year mortgage for $115,000 at 9% interest, they would have $10,000 in equity because of the “standard” down payment they would have paid up-front (outside of all the other closing costs), plus only about $4532 paid in equity on the loan for a total of less than $15,000 instead of $30,000 equity.

Working With Investors

There are several types of real estate investors out there, and one of them may be just the person who can help you get into a home of your own.

Lets talk about real estate investing for a moment. You’ve seen the infomercials, I’m sure. People in Hawaiian shirts sitting on tropical beaches who are making hundreds of thousands of dollars a month and want to tell you how to do it-- for hundreds of dollars of your hard-earned paycheck.

Let’s be realistic. Why are they spending their time selling a program when they could be out getting rich in real estate?

Real estate investing isn’t all it is built up to be. I know from experience. People can and do make money in real estate investing, make no mistake. But it is not easy or often very fun. They don’t spend a lot of time on the beach. They are repairing houses, keeping records, and evicting scary tenants. If the economy turns one way they make money, and if it turns another they lose lots of money. They may be getting burned out on the whole thing and ready to sell $500 tape series themselves. And they may be very happy to sell you one of their houses.

Watch for ads that say that they will buy houses for cash. Call them and ask if they are willing to do a rent-to-own deal on any of their available houses. Tell them what you have to put down (even just a month or two of rent) or if you are willing to work at fixing up a broken house for a down payment.

The New Breed of Investors

There is a new breed of real estate investor out there now. This one might be even better able help you. This is the “Don’t own it-- Control it” style investor. They make their money by being the middleman in a rent-to-own or lease option deal. They find a FSBO who needs to sell and is willing to take a 1-5 year lease with an option to buy on the house. They get the rights to sub-lease the house. They then turn around and find a person, like you, who wants to buy but has no money or credit for it, and puts that person in the house. Their goal, of course, is to make money on the deal- by making extra on the rent money and getting an “earnest money” deposit, which will go toward the purchase price of the house.

How can you help them by helping yourself? Well, one of the problems with this kind of investing is that they might get stuck with expensive rent payments and no renter. They may be very happy to get you into the home with little down. So tell them honestly what you can afford to put down. They may be negotiable on the subject.

One of the advantages of buying from one of these investors is that they often don’t care what your credit is, as long as you make regular on-time payments. And if you find the right kind of “Control It” investor, 100% of your rent and money down will go toward the purchase price of the house. It can be a very good deal for you. Watch for ads in the paper that say “rent-to-own” or “lease option” and “100% rent credit.”

This is a great way to go if you are reluctant to work with a FSBO and without a real estate agent, or if you feel insecure because you don’t know enough about real estate. It might be an easier and less risky way into your house. But remember that you are paying this person to help you. If you feel that what they do is not really anything you couldn’t do, and you would rather work with the FSBO yourself, go for it. You will save the money the investor would have made on you.

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7. More Ideas for Buying a Home With Bad Credit

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If what we have learned so far has not been enough for your eager mind, I have still more ideas on how you can buy a home when you can’t get a loan.

Mix and Match.

This is where you get to be creative and put several techniques together. For instance, you find an investor who with a home that has an older assumable loan and is willing to carry the 2nd mortgage for you.

Or to be more creative, you could rent-to-own a home for 5 years. At the end of the five years you purchase the home by doing a wrap-around mortgage with the owners VA loan, and to sweeten the deal, you throw in that boat that has just been sitting in storage costing you money, and get an additional $6000 off of the purchase price of the home.

I think you get the idea now.

Find a Returned or Repossessed Mobile Home.

Don’t just look into houses. In some areas mobile homes are a good deal. In some areas of Arizona, for example, the land prices are rising so fast that it makes the mobile home worth it, even it the home itself depreciates every year. You often can find a great deal on these homes, as well as motivated sellers.

Buy Land

When you buy land it is easier to find owners who will carry the loan with no qualifying. If you are a construction type, you can build your own home.

If you plan on building, though, be careful. Loans to build a home are sometimes harder to qualify for and get than standard home loans. On the other hand, once you have purchased your land you now have an investment property that you can use to sell or trade to get your new house, or at least the down-payment for it. Or save the land until you are able to build.

If you live out in the country you might be able to put a mobile home on the property. Mobile home loans are sometimes easier to qualify for than a house. Even if you can’t get a new one, older ones are often for sale cheap, and can be moved.

“Look into Community “Sweat Equity” Programs

Check into community programs. They can be a very valuable resource, particularly if you have nowhere else to turn. Our community has a program that helps single parents and other financially struggling people to build their own home. They use “sweat equity” to make the down payment. It takes almost a year of part time labor, but you get help from professionals and volunteers, automatic equity in the new house, and a loan for the rest, even though you may not qualify under ordinary circumstances.

These sweat equity programs are becoming more and more popular and are getting more funding. The Bush administration awarded $25 million in “Sweat Equity” grants to communities and organizations in 2003 and the funding continues to go up.

There are now an amazing number of organizations that want to help you get into a home of your own. Besides the many charitable organizations doing this, HUD (U.S. Department of Housing and Urban Development) funds many counseling agencies that can show you ways you can get into a house. Consider taking advantage of the help they offer. It may take some research, but it could be well worth your time.

Below are some national organizations that can refer you to local members or affiliates in your area. Check out the information to see if there is an available program for you in your community:

More Ideas for Raising Money for a Down Payment

You may already have the money for a down payment within reach, and didn’t even realize it. Here are some extra ideas for raising cash:

1. Borrow money from relatives or friends for a down payment.

2. Sell or borrow against other property or real estate you may own.

3. Sell a second car, RV or boat that you own and use the cash for the down payment.

4. Sell heirlooms or collectibles you own to raise money for a down payment.

5. If you own securities you can sell them or borrow against them through a loan from the stock brokerage.

6. Cash in or borrow against the built-up value of any life insurance you have.

7. Withdraw money from your IRA. If you're a first-time buyer you can pull out $10,000 penalty-free (though you must pay state and federal income tax on it) to put toward your home purchase. If you're not a first-time buyer, pullout the very least amount you must. Otherwise, you will have to pay both the 10 percent penalty and income tax on an early withdrawal.

8. Borrow against your retirement funds. In some cases, the rate on the loan may be as small as 2 percent. If you add too much to your debt burden, however, you may not be approved for a loan.

9. Change the withholding taxes, if permitted, on your salary in anticipation of higher deductions when you get a mortgage. Your take-home pay will increase, giving you more funds to put toward a down payment.

10. Pawn something you own and use the proceeds for a down payment. You can get the item back after you've moved in and can afford to pay the pawnbroker back.

11. Refinance your car or other vehicles and add the proceeds to your down payment.

12. Negotiate for a balloon payment. This is just a way of buying time. You sign a contract that says you will pay a certain amount at a later specific date. You still have to come up with the cash. It just gives you more time.

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8. Some Parting Advice

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How to Find “For Sale By Owner” Homes

The easiest way to find FISBO's is to check newspaper ads and ads on the Internet. FISBO's usually identify themselves. As I mentioned earlier, also watch for real estate investors ads. They will usually have ads to buy houses, but contact them anyway. Maybe they need to sell one of them. Often investors have the ads that look for people to rent-to-own or lease/option their house.

Another good way is to drive around neighborhoods that you want to move into and watch for houses that are on sale. Make note not only of houses that are for sale by owner, but also for houses that have real estate signs up. If the real estate sign goes down after a long period (6 months) they probably have not sold the house. Maybe they are ready to deal with you now.

Ask people you know if they know anyone with a house for sale. Some of the best connections come from people you know, and they are more likely to do some creative financing for you.

Working with Motivated Sellers

The key to finding a home to meet your special needs is not the location or the condition of the house or even the money. The key is to find a motivated seller. Find a seller who really needs what you can offer. Don’t take advantage of these people. This is what has given some investors a bad name. You are in a position to help them, and as you help them you will be helping yourself at the same time.

Give Up Something to Get Something

I’ve said it before, but it is worth repeating. Maybe you will be lucky, but most likely because you want something special (the right terms for a home without a credit check) you may have to give in on something else. It might be settling for a higher purchase price, or a little higher interest rate, or maybe a fixer-upper house. Remember that you are in charge. Don’t settle for something that you can’t live with. You can’t get something you don’t ask for. Ask for what you want. Don’t let the fear of being rejected stop you from making an offer to a seller. You will never know if you could have gotten it, if you don’t ask. And not asking is an automatic “no.”

Use This Chance to Start Over

It is important that once you are in your own home you use this chance to rebuild your credit. If you have had bad financial habits in the past, you have a new opportunity to change things. Use it by trying to make all you payments on time, every time. As the old saying goes, “Today is the first day of the rest of your life.”

Just do it! Don’t give up!

Don’t get discouraged. I know you can do it! If you are afraid you don’t know enough about real estate, do it anyway. Ask for help. Go out and find the information and/or the help you need. You will never know it all, so don’t let the fear of not knowing enough stop you.

Thanks and good luck! Enjoy your new home!

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9. Special Bonus: 10 Ways to Buy a Home With Little or No Money Down

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Here is another special bonus from I-Can-Buy.com!

10 Ways to Buy a Home With Little or No Money Down

1. Rent-to-Own or Lease-Option

Since I have already discussed this option in detail in Chapter 5, I won’t repeat myself. But this is really is one of the best ways to get into a home of your own when you can’t get a bank loan. Remember that you may still have to get a loan down the line. If you have a lease-option for 5 years, at the end of that time, you will need to purchase the house, so you can use the time to fix your credit, or use one of the other options that are discussed in this book to purchase the house at that time. You can always try to negotiate another 5-year lease-option if you need more time.

2. Sweat Equity

Sweat Equity is a way to get a home by trading work for equity in the house. This could be used for a down payment or for purchase later. This is a great technique if you are handy with tools, yard-work, and paint.

Look for fixer-uppers in neighborhoods you are interested in. Many times these homes will have a hard time selling and the owner is ready for just about any offer. You will find these houses ranging from just needing a little “cosmetic” work like landscaping or painting, to totally trashed out houses in need of some serious renovation. If you are into repairs, this is a great way to get a home for a good deal.

If you are not skilled at repairs and renovation, be careful about fixer-upper homes. They could end up costing you quite a large amount of money to pay others to fix.

I also recommend getting a home inspection so that you know what exactly you are in for before you begin.

3. Seller Carry-Back

As we mentioned in chapter 4, look for a home with an assumable loan. Instead of buying out the owner's equity, ask the seller to carry back a second mortgage for the rest of the money owed. If you can get the seller to carry all of the rest, you can get the home for no money down.

4. Offer an Object for the Down Payment

Offer something other than cash (land, a car, a boat, or valuable collectibles) to the seller instead of a cash down payment. This is why it is important to listen to sellers. Find out what they want and need. Maybe you have (or can get) just what they need. For instance maybe they wanted to use the down-payment to buy an RV and it turns out that you just happen to have one you don’t need. Offer that vehicle as a down-payment, and it saves you from coming up with the cash.

5. Offer Services for the Down Payment

Offer your services or expertise to the seller in lieu of a down payment. Some examples include $10,000 worth of auto services if you're a mechanic, dental work if you're a dentist, desktop publishing services if you're a designer, artwork if you're an artist or legal work if you're an attorney.

6. Foreclosures

Look for foreclosure properties that require little or no down payment. Some lenders and government agencies will let you buy a foreclosure with no down payment if your credit is good and they're anxious to have the home occupied, or if you have skills (carpentry, landscaping or even painting) that you can use to increase the home's value. Distressed properties - assume with little or no down to save foreclosure.

7. VA or Other No Money Down Loans

Look for conventional loan programs such as VA or FHA that require little or nothing down. VA loans have helps countless veterans get into their homes. There are often programs available to first time buyers or people who are distressed (such as with Hurricane Katrina) that will help people get into a home with little money down. You usually will have to qualify for the loan with the bank, though.

8. Find an Investment Partner for Equity Sharing

Look for an investment partner who'll put up some or all of the cash in an equity-sharing partnership. You make the monthly payments and the two of you split the eventual resale profits.

9. Wrap-Around Financing

I told you about wrap-around financing in Chapter 4. That is where you assume a seller’s VA Loan by doing a new Contract for Deed. Since this contract is flexible and does not have to follow the old loan, you can ask the seller to carry not only the loan amount, but the rest of the purchase price of the house, letting you get in with little or no money down.

10. Government and Community Down-payment Programs

There are many community and non-profit organization programs out there to help people get into homes of their own. Many of these do no require any money down. See more information about these programs in Chapter 6.

There are some organizations and programs that will pay for some or all of the down payment for you. Generally these are for lower to moderate-income individuals, but these days that includes a lot of people. You also usually have to be able to qualify for an FHA loan (which is somewhat easier than a conventional bank loan.) If you have been unable to get into a home because you don’t have enough money for a down payment, then maybe one of these programs will be for you.

Below is a list of organizations that have down payment assistant programs:

• AmeriDream Inc.
http://www.ameridream.org

• National Home Foundation
http://www.nationalhomefoundation.org

• GiftAmerica Program (GAP)
http://www.giftamerica.org

• The Nehemiah Program
http://www.nehemiahprogram.org
• New Song Down Payment Assistant Program
http://www.buyers-assistance.com

• Equity Grants
http://www.equitygrants.com

• Realty America
http://www.realtyamerica.org

• Homes For All Program
http://www.ezdownpayment.com

Also check in your local area, because many communities have similar programs of their own.

More FREE Real Estate Stuff!

2009-10-16T14:13:00.011-07:00

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Free Real Estate Contracts and Documents

2009-10-16T14:11:00.006-07:00

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Appraisal Contract

Escrow Agreement

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