Buy your first home with bad credit or no money down

How to Buy Your 1st Home with Bad Credit and No Bank Qualifying.

Have you ever heard someone say any of these things about buying a home.
You need to have good credit.
You need a down payment.
You need to have been on the job for at least 2 years.
You have to qualify for financing.
I am here to tell you that these and many statements like them are all lies!

The fact is nobody regulates who can and who cant buy a home. The
truth is home ownership is available to anyone and everyone regardless
of race, credit, or cash down, if you know what you are doing
.Throughout this report I am going dispel some of the gemon myths that
keep people from even trying to go out and get their own Home. Myths
that are orchestrated by real estate agents, banks, attorneys the very
people most people turn to advise them on buying a house. Many if not
most are ignorant to strategies that would allow you to buy your home
today. Oftentimes its in their best interest to keep you enslaved to a
life of renting. Let me give you a few examples.
Real Estate Agent Friend or Foe?
Look at the local run of the mill real estate agent. He gets
paid when you buy property and escrow closes. Typically hell earn a 6%
gemission. On a house that sells for $100,000 thats $6,000 right off
the top. You have another 1-2% in closing fees. Even if the seller is
desperate to sell and would finance the property to you, if you dont
have $8,000 down the deal cant close because guess who wont get paid.
Many national broker chains do not allow the agent to discount the
gemission, so the deal is dead.

Even if you do have the $8,000 down, and if your credit is less then
perfect, Ive seen agents killing an offer because for some
reason they think it their job to decide whats right for the
seller. Having been a broker for years I am often amazed at the huge
egos some agents have when it gees to who they think should, or should
not own property. Fewer then 10% have any knowledge whatsoever in
structuring a transaction other then a strait 10-20% cash down to new
loan transaction. This is just one example of several built in
conflicts a real estate agent has in working with a Nonconforming
borrower. After all they say Why should I work for free. They
prefer to just placate you, and tell you to save your money until you
can qualify for a new loan.
Banks and Lenders Are We There Yet?
Welgee to the world of double talk. Where rules and regulations flow
like manna from heaven. There is only one thing I can count on with
lending and that is that things change. Thats the good news and the
bad news. There are hundreds and hundreds of loan programs out there.
Its no wonder people get confused. Many of the loan rates we always see
advertised are available to fewer then 10% of the general population.

The truth is approximately 67% of people out there have Bad credit.

You see credit is graded like a report card A, A-, B,C,D and not all
lenders cater to all credit borrowers. To confuse you a little more,
not all lenders keep the loans they originate. Many, if not most, are
bought and sold on the secondary market. Depending on the grade of
your credit, [determined by your FICO score], will determine what
program you qualify for.

To top it all off not all lenders offer credit to all borrowers.
For instance many banks only lend to A credit score borrowers because
they portfolio or keep their loans and dont sell them on the secondary
market. So if you march into your local bank with a B credit score,
they will turn you down cold . The loan officer you speak with may be
gepletely ignorant of B,C,D paper credit programs out there, because
they have never done one because his bank doesnt do them. He could
care less about you and your problem. Try borrowing from a bank if your
self employed. My hourly employees that get a W2 have an easier time
borrowing money then I do being the boss.

So if banks mostly cater to the A credit score borrower what of the
rest of us. Enter the world of Mortgage brokers and bankers. The
resellers of the thousands of lenders.
Confusion with a Price Tag
Mortgage brokers get a cut or gemission on loans they originate. They
basically collect all the info from you and then ship it to the lender
for approval and underwriting. Your mortgage brokers experience
and skill is critical to you getting approved because they
manipulate your file and present it to the lender. How things are said,
explanations, etc even the repor they have with the mortgage reps, make
a difference on how a file goes. Enter the world of lender
rebates, par pricing and lender fees.

Many mortgage brokers that say they have hundreds of lenders and they
shop your file, may only work with a couple of gepanies. It has been
my experience that brokers find a specialization and cater to that
market. Some specialize in lower credit score programs Sub par
lenders and other do conventional or FHA, VA government programs.
It really pays to shop.

People get discouraged because they go to the wrong store looking for
their loan, since they dont realize there is a difference in
lenders. It is important you ask allot of questions.

The loan process itself in its simplest form is confusing and
time consuming. You go through a series of approvals personally as well
as for the property. Every i must be dotted and T crossed in order
to have it fund at the close. I have even seen lenders not fund a deal
because they ran out of money, even though the paperwork was done
correctly. They lose funding on wall street or change the program at
the last minute. Any thing to save face and blame someone other then
their own confusion.
What about my Lawyer?
But what about my attorney, he can help me? It has been my
experience that many people use attorneys in the wrong way. They are
advisors and their job is to point out options for you and address the
issues that may pose legal problems down the road, but it is up to you
to make the decision. Too often people go to their attorney who handled
their will or divorce asking questions about real estate. There are
many areas of law in which to specialize. Real estate contract law is a
specialty that varies in every state.

The egos in the world of attorneys is deplorable and a disservice to
their profession. I dont know is not in their vocabulary, or worse
they give advice in an authoritative manner that is strictly an
opinion. An opinion on a topic they have no specialized knowledge of.
Remember one thing that if you enter an agreement with a person that
agreement is only as good as a mans word. If you look them in the eye
and your gut says run, even the best written legal document in the
world wont solve your new problem. I have found many attorneys
Dont know or inherently dislike Creative real estate
strategies. There are ways to mitigate concerns brought on by
Creative real estate strategies. Given the choice between getting a
home today, or renting, many buyers are willing to take an informed
chance. However my advice is to always consult a legal professional,
just make sure they actively know and do real estate. A good Real
Estate attorney is worth its weight in gold. It is especially advisable
to consult an attorney when you do not use a real estate agent.
You can get allot of legal advice for a 6% gemission.

Myth: Its better to Own
Fact: Its better to control then to own

Why is it that the rich people in the world today, dont really own
anything, but control everything? They spend thousands of dollars
setting up trusts and various asset protection strategies that transfer
ownership to their children or corporations etc. Why do they do it?
Aside from tax benefits, they do it because they realize that
controlling an asset gives them the same benefits as ownership.

For instance when Sears or a similar retailer leases mall space from
the mall developer. They have all the benefits of owning their store in
the mall. They lock its doors , say who works there, paint the store
etc. They have what you call a leasehold estate for a set period or
time. They control all aspects of that space. They can do with it what
they will.

Buy Your 1st Home with a Lease with an Option to Purchase

Doesnt it make sense that if rich people and many business
control their estates through leases you could to? Absolutely, and you
can do it regardless of your credit rating and without any big cash
down payments. In a moment you will ask yourself Why would I ever want
to Own a house?

What does it mean to lease with the option to purchase, and what are the advantages?

When you lease a home you are entitled to all the benefits of ownership
for a set duration usually a year or years depending on how you set it
up. You decorate it how you want, say who can be there when you want,
paint it etc. You can do all the same things a homeowner does. The
major difference is that the title is vested in the landlords name and
the mortgage is in his name as well.

When you have an Option to purchase a home you have the right, not
the obligation, to purchase the home for a predetermined price and
terms etc. Basically you lock the seller into what price they will
accept for the property. The loan stays in the sellers name. Did a
light just go on? Why would you ever want to have a mortgage in your
name when you can still live in the property and control it just like
you own it. You are able to control the asset (Home) for the same
price you would have paid for it if you would have gone out and
qualified for a new loan.
Advantages to You
When you structure a lease purchase correctly, you control the property
just like you own it. Some advantages to you the homebuyer are :
Check out the neighborhood, schools, etc before you lock yourself in.
Get in without bank qualifying.
Get in with little or no money out of pocket.
Structure a monthly rent credit that accumulates to a down payment.
Locks in a price today so when the property appreciates You win!
Move in today.
Gives you time to clean up bad credit

You may ask, Why hasnt my real estate agent or lender told me about this?
BECAUSE THEY DONT GET PAID!

Why would they tell you how to buy a house if they dont get anything?
Sometimes in depressed markets Ive seen agents that will wait for a
gemission when you eventually refinance the property. The problem is
they try to shorten your option period.

It is in your best interest to lock in a price today with an option
agreement with the seller for as long as possible. 5 10 years. An
agent will want the lease period to be as short a term as
possible.
Find Motivated Sellers

There are many reasons sellers are willing to sell their home with a
lease purchase option. The number one reason is debt relief or payment
relief. Maybe they have bought another house and cant make two
payments. Another motivating factor for selling fast is divorce, or a
job transfer, death, downsizing, etc. the reasons are endless. You see,
the key to buying a home for no money down, and without credit is to
find people who want to sell more then you want to buy. I call them
Dont Wanters. Many Dont Wanters only have a few thousand dollars
of equity, so they cant sell with an agent because they cant pay the
6% gemission. They are in the exact opposite situation that you
are in, but their desperation to sell, is greater in many cases, then
yours to buy.

When you find these types of sellers its easy to make a long term win win deal.

As you can probably tell from this, its important that you structure an
offer to a seller that benefits you. There is no such thing as a
standard agreement in my opinion. Some forms are more gemonly
used than others geographically. Most have a slant one way or the
other in favor of the seller or buyer. You want to make sure you use a
form and geplete it in such a way to be fair but also to protect your
buyer interests. Ask for things that protect you the buyer.

For instance you want to control the term and the time that you allow
yourself to refinance. I ask for a 10 year lease with extensions then
back off from there. Remember when you have an option you dont have to
buy the property. I always will get the right to sublease should I
decide to move. I like to ask for monthly rent credits each month that
credit to the purchase price and build equity. I like to have the
property title put in a trust and have the interest in the trust
transferred to me and held by escrow. I require all payments be tracked
and paid through a long term escrow, so as to assure the Seller makes
all the payments to the underlying lien holder. I also require a
memorandum of option be recorded, so the seller cant further encumber
the property.

You can see that even though it is a relatively easy concept to grasp.
The mechanics of structuring a lease purchase option so as not to get
burned is allot more detailed. Its important that you take the
necessary steps to protect you, the buyer, when you set up your
purchase. That is why it is so important that you use experienced
professionals or coaches. Even the best structured deal has an element
of risk.

Buy on a Contract:

Another vehicle to purchase a home for little cash down, and with bad
credit is on a contract or agreement for deed. Depending on how you
structure it, title will stay in the sellers name or pass
to the new buyer. In some states the title gepanies can wrap the
underlying financing while others states wont allow title insurance to
be issued with wrap around financing if it violates the due on sale
provision that is contained in almost all institutional financing. The
basic premise of a contract is that you control the asset (Home)
through a contract that will give you the benefits of ownership. The
underlying financing stays in the sellers name and they wrap around the
underlying mortgage. Its a great way to buy a home.
Where Do I find these Homes?
You may be saying this sounds fantastic but where do I find these kind of sellers.

The first thing I would like to do is invite you to let go of your
traditional views on finding a home. Rather than looking for a
particular house on a certain street, think more in terms of finding a
situation, or a problem that you can solve for someone. You see one
mans nightmare is another mans fixer upper.

Focus on the Why not the What
You want to focus on the Why people are selling rather then the
What. Real estate listings tell us the Whats, like number of
bedrooms, baths, square feet etc. They neglect to tell us the
Why. Why they need to move, the people problems. Its
not the real estate agents fault they cant tell us, it is a by
product of all the agency laws that have been passed over the years on
who is representing who. It used to be you could look in the (MLS)
Multiple Listing Service, and see what people owed and how much their
payment was, but not anymore.

The best way is to talk with the Sellers yourself
and ask them lots of questions to determine the Why so you can solve
their problem. If you fail to find out Why even an all cash offer for
full price may not be what they want. Ask questions.

Local Classified Ads
Calling newspaper classifieds is a good place to start. You will want
to look for ads that talk about the sellers motivation, and homes that
are offered For Sale By Owner and not listed with an agent. Be
prepared for some grumpy people, as some wont like to give out
information. It will be up to you to extract the critical data to see
if it is even a possibility of structuring a lease purchase. Its best
to get as many facts and answers to the Why questions before you go
out and look at property. You will save a great deal of time and
frustration. What you are looking for is sometimes more of a feeling
then specific answers. You are prospecting for flexibility and
desperation. It manifests itself in emotion that is
sometimes conveyed in voice tone and inflection, more then what is
actually said. You want people that will be open to you solving their
problem.

Dont forget Investors
Another great place to look for motivated sellers is to look in the
real estate wanted section of the paper. Call the real estate investors
that are advertising We buy houses and ask them if they have any
lease option purchase properties. You might be surprised. Many
investors at times need to turn inventory and begee big time Dont
wanters
Let Sellers gee to You

Another great way is to have property gee to you. If you dont like to
go outside your gefort zone try placing an ad in the classifieds
saying something like this:
Couple looking to lease
with option to purchase
1st home Cliffside area
$100K range. Call 555-5555

I have ran an ad like this many times over the years and bought
property . A few years back I leased with the option to purchase my own
personal residence. It was a beautiful 5,600 square feet all brick home
on 3 acres in the country. It appraised for $469K and I had an option
price of $327K with a payment of only $1,200 a month. The Seller
fed the payment $1,500 a month. He was desperate to get out, and was
credit conscious, so he fed the payment. I lived here for 2 years until
I found another home I liked better.

Once you have found and negotiated your new home its time to get in and
clean up those credit issues that have stopped you in the past from
utilizing your credit. Even if you structure a long term purchase it is
geforting to have credit available in times of emergency.
Isolate any Bad Credit

Refinance or Sell for a Profit

Your on time payments that you make to the escrow gepany will help in
a big way in getting the property refinanced when the time gees. They
can report it to the credit bureau and it will get you a mortgage
rating even though you dont have a mortgage. Along with the monthly
regular rent credit, if you had it in your agreement, and any equity
appreciation, you should have a nice chunk of equity when the time
gees. Any improvements youve made since you moved in will also
benefit you. All this equity accumulation can happen because you have a
right to buy the property at $100k, but now your home has increased in
value to $130,000 so the $30,000 equity is yours! Just like if you
had owned it. You may even decide to move at this time and sell
this home to another party and pocket the $30K .

Over the years I have earned over a million dollars buying and selling
property without cash and without credit. And at the very least
own a piece of the American Dream, Your Own Home. All the best!