Creative financing for live in investment

Hi, I hope is the right forum as I am new to all of this. Please feel free to move this if not.

My situation is that I have lived in a rental property for 8 years (tennant at will for last 7). I recieved a letter that the property was to be offered for sale for 135K in a market (32548 zip) where comps are 200k. It is to be sold as is and needs repair. Kitchen cabinets, flooring, exterior wood frame wall on florida room sagging, jalousey and old wood frame windows, and 2 baths.

I am currently in a situation where I cannot get financed due to no fico score (bankruptcy 10 years ago and have not reestablished credit and no proof of income due to self employeed (behind on taxes)).

This sounds rediculous and hopeless to me to be in this situation. My problem is that costs have risen to such a level in the rental market and in real estate sales that I if I dont finance this I will surely be paying the same if not more for a rental rather than purchasing.

I have approached the owner about lease option, but she is not in a position to be able to do that. She says that she will take all offers and will agree to the one which is acceptable to her.

I am supposed to deal with her agent for any offers. He has already shown the house twice yet it is not listed so I dont quite understand that. I had a realtor friend of mine call him and from what I can tell he feels his toes have been stepped on?

I dont want to wait too long to act, if I can, because I’m sure this place will be gone soon. I am hopeful that someone knows of financing based on property value alone, length of time as a tennant, or something along those lines.

Any help or advice is greatly appreciated!!!


You probably can only get hard money for this deal at high interest rates and may not be able to at all because of the tax situation.

You can expect a maximum 12 month term and the lender will take it from you if can’t refi.


If you intend to occupy this rental property and the property is a 1-4 unit, you could consider either a 203k (for rehab) or 203b (for non-construction lending) insured by FHA.

FHA doesn’t require credit scores, your BK is aged sufficiently and rates are on par with conventional prime rates, you can finance up to 97.75% with the 203b/98.15% with the 203k, you can finance up to 6 months of PITI (with 203k only) to mention a few of the benefits of these loan programs.

Feel free to contact me if you have any questions.


Scott Miller

Thanks rvester and ezloanz. I was sure this post was going to go untouched!!

I dont really understand the hard money issue ( I guess mostly for flips where there would be a quick turn around?). If it were to financed for a year does that mean they sit on the loan or draw only interest for that year and then I would have to refinance?

The FHA stuff sounds interesting. I thought before when I have attended real estate programs that credit was a big issue for FHA. We have contacted our CPA who has our tax stuff at a book keeper that will be out of town until next Monday. Hopefully not long after that I will at least be able to provide proof of income.

My wife went today at the advice of a local lender and pulled the history on our utilities. We have been here since Aug. '97, so right at 9 years. They said they can establish some credit from utilities, but with out the proof of income I still am on hold.

Scott please advise further on the FHA programs and what would be required of me to use one of the programs you mentioned.

Thank you both for the help and information.



I didn’t notice the “no traceable income due to self employment” comments in your original post; I apologize for the oversight.

How long have you been self employed (FHA allows for self employed borrowers with two years of income history; do you own less then 25% of the company)?

As for your back taxes, if any of the aforementioned is Federal tax debt, you would not qualify for FHA financing on this basis.

Without knowing more about your financial/credit history and property, it appears that you might have to consider either a hard money loan or a subprime rehab loan.


Scott Miller

Thanks Scott,

Can you comment on the subprime rehab loan.

Several years ago we attended a seminar which presented different programs available in older neighborhoods or historic areas for rehab/restoration, but I think they were all tied to government loans. I’m not sure if this is the type thing you are referring to or not.

I’m not looking to buy this house only as an investment, but more for a residence for several more years. We like the neighborhood and the neighbors. Our incentive to stay here is mostly that we like it here. The other fact is that we are in an area that is steadily being rehabbed. We are across the street from a large body of water and property values have steadily increased. Many older homes have been purchesed at market prices then razed and a new home built. I have been told by a couple realtor friends that the lot alone would be worth the asking price.

The home was built in the early 50’s and is a concern as far as how much could be done to rehab cost effectively before starting from new construction would be more wise.

At this point we are keeping all options open including just leasing another property for a year and in the mean time working on the credit issues and getting the taxes squared away. I just hate the thought of leasing for another year at a rate that could be going toward my own mortgage.

Thanks for your comments,



Many of the large national lenders have programs similar to FHA, but based on your income have much better rates. They allow for no credit scores, and use non-traditional credit such as utility payments, car insurance payments, or cell phone payments . For example Bank of America has a program called ACORN that uses the above options on lieu of credit, has a rate .375 below conventional rates, and no MI. Like the FHA programs you wil have to provide evidence of income. Some of these programs allow for up to 15% undocumented income which helps if you rent out a room or your wife has income to use, but will not go on the loan. Have you had your credit reviewed? Or are you just guessing that you have no scores? You are in a tough situation; good luck.

I think you meant to give “Community Accomodations” (not ACORN) as an example of a loan from Bank of America.

The assumptions you are making based upon this recommendation is that the OP is of low to moderate income purchasing in a low income to moderate income census tract.

Other considerations with these types of loan products are; must be owner occupied, verifable income, 6 month PITI and if the borrower is self employed with a CLTV =>75%, a minimum mid FICO score of 680 is required and 20% down payment on 3-4 unit properties (but down payment and closing costs can be gifted or granted).

I don’t think this type of loan program will work out, but without further information, your guess is as good as mine as to what loan program will.


Scott Miller


Bank of America retail has the ACORN program as well as community accomodation programs. It is only available on the retail side, not wholesale. So most brokers are not familiar with it. Bank of America is where I started before I became a broker that is the only reason I know about it. The nice thing about ACORN is that you don’t need to live in a low 2 moderate income area, it is completely based on income. This year the limit is 55K or less.

However on the BOA community accomodation loan the minimum FICO is 620, verifiable income, no reserves, no minimum self-employment seasoning (which I find to be crazy, you could self-employed for a day and still qualify), and soft seconds are allowed up to 106% (DAPS). The other nice feature is collections, judgements, and charge-offs do not have to be paid off, and you can be one year out of foreclosure instead of two like with the FHA program. It is done as an 80/20 and the rates are very comparable to FHA, but the kicker is no MI. You might be thinking of the Fannie Mae my community loan for the guidelines you posted.

You know what also might work is if the seller were willing to carry a small second. This way the buyer could go sub-prime. I know Argent will allow a borrower to go to 100% CLTV with a seller second. This is “assuming” (there I go again :))that Jeff456 has at least two credit scores above 500.