I am curious as to everyones thoughts on the following, please… :help
Since getting into rehabbing, my brother who lives in another state, would also like to get involved. He has cash for repairs (approximately $30k liquid), but unfortunately, his credit score is in the low 500’s. He, like others in the world, had a rough patch, but is working his way back up.
My suggestion to him, and this where I am looking for input, was to offer the bank/mortgage company a way to guarantee his payments while doing the repairs and selling and/or renting the house he chooses, while this would help him to re-establish his credit. In this credit environment, I was trying to think of a way for this to work for him.
Let’s say he was able to purchase a property for $55K, with an ARV of $115,000, from an auction/foreclosure/short sale/etc., His payments because of his credit, would be somewhere around $700/month @10% plus RE taxes and PMI on a 30yr loan. He would offer to secure these payments for the first year by putting it into a savings account (established at whatever bank he chose) so that the bank is guaranteed the repayment during the first year. Add to this, I suggested that he also offer to pre-pay his first two-three payments in advance, with an account (again at the same bank) opened with auto-withdrawal for the payment and the guaranteed account as back-up for the bank. At the end of the year guarantee, if he hasn’t sold the property for whatever reason or he has decided to keep it as a rental, assuming all payments were made on time, the bank would release these guaranteed funds, and his credit would be nothing but the better for it, and he would have had established a relationship with the bank.
What do you think? Is this feasible or would it sway a decision in his favor considering his credit score?
With the stringent requirements of most HML’s nowadays (I understand their minimum FICO is now 625, which doesn’t help my brother), I don’t think this would be an option for him, not to mention the costs involved.
OK, let me know what you guys think! I’d especially would appreciate input from any mortgage brokers who think this is viable… thanks again!