Posted by Ed Garcia on January 07, 2001 at 11:46:10:
Johnnie,
You don’t give us the dates of your charge off, or tell us if you have any off setting credit. If your charge off is 2 years or older, and you have re-established your self in that period of time, then the lender could accept a letter of explanation, and you could move on.
Today’s lenders who do NIQ (No income qualifiers), NIV (No income verification), Stated Income ( Accept the income as stated on your application), or other programs that allows no verification of income, are credit score driven. So Johnnie, I don’t have enough information about you or your credit, other than you’ve had a charge off.
Johnnie, If someone has bad credit and no money, they can still do deals. I’m going to structure just one way as an example for you, but there are at least 9 different ways.
Example:
I find a house that has a small balance on the first. Lets say the house is worth a $100,000, The balance on the first mortgage is $30,000.
If I wanted to buy this house for lets say $80,000, I could ask the seller to carry back $15,000 and go to a hard money lender to borrow 65% of AMV (appraised market value) of which is $65,000 and the seller carrying $15,000 in second position, would ad up to $80,000. It would also give your seller $35,000 new cash, and $125.00 income on the $15,000 loan that they carried at 10% interest only, for 5 years.
Johnnie,
In my workshop, I teach that there are at least 9 different ways you can do a deal with poor or bad credit.
Now before I give them to you, I want you to know that I’m really supportive of learning deal structuring. The first thing you need to do is, “investigate your deal” to know what I call (where the bodies lie) another words what is the seller’s main objectives or motivation. That allows you to have an idea of what approaches are going to be compatible with the sellers needs, allowing you to do the deal.
Here are the 9 ways that I’ve mentioned.
(1) PARTNERHIP: Find a 50/50 partner. It don’t have to be 50/50, it can be what ever you can negotiate.
(2) FLIP: the best way to flip is to find a potential buyer first and then find a property. You can do this by running an ad on a property to see what kind of action you get. Once you have a potential qualified buyer, you’d be surprised how easy it is to find them a house.
(3) LEASE OPTION: Many times you can buy and sell with a lease option. We call this a “Sandwich Lease Option”. Jim, I’m not going to go into any great detail, you can find this information all over this forum.
(4) SELLER CARRY BACK: This is one of if not my favorite way to buy. Now the best way to utilize this system, is to do a second seller carry back in order to give the seller some cash in the deal. If money doesn’t exchange hands, many times the seller doesn’t feel that they consummated a sale.
(5) HARD MONEY: Hard money, is an equity loan made at approximately 65% LTV, based on the equity of the property only. Credit is not a consideration.
(6) HARD MONEY/SELLER CARRY BACK: Again, You can have the seller carry back a second and refinance the first, giving the seller some money. You can do variations of this system.
(7) SUB PRIME FINANCING: Many National lenders will provide financing at 70% with poor credit and won’t verify money down.
(8) SUB PRIME/ SELLER CARRY BACK: Again this combination can provide money to the seller, rather than ask them to carry the whole thing. Also there are local independent portfolio lenders that will lend as well as mortgage co’s and I always recommend seeking them out. National one’s would be Associates Finance, American General, Beneficial etc.
(9) CREAT YOUR OWN MORTGAGE: In our work shop, Terry Vaughan covers this, and shows you how to discount it and market it.
Johnnie, I hope this post is helpful to you. The only way you won’t be successful in this business, is when you stop trying.
Ed Garcia