I am trying to help my brother (will call him Al) find a lender. Here is the current scenario.
About 4 years ago Al went through a rough period and defaulted on $4,000 on various accounts ranging from credit cards to medical. However, he did manage to continue making his mortgage payment that was owner financed and never reported to a credit agency. Unfortunately, he did not clear up the outstanding 4K in debt.
He decided to relocate to Texas where I am and put his land in CA on the market. It just sold and I have found him a nice house here in TX for 72K. He will have approx. 30K for a down payment.
Today we found out that no lender will take him because of the following:
[]he doesn’t have a job here yet[]he hasn’t had any credit in the last 4 years or so and therefore has NO credit score (remember his mortgage was owner financed and not reported)
Al intends to pay off the 4K he currently owes when his funds clear. He has offered to get a letter from the person currently holding his note and the cell phone company he has been paying for the last 3 years but no one will take him.
I have to believe that there are SOME options for someone who has 40% down.
Is this something that HMLs can help with and what is a typical interest rate for this type of loan
Look for a lease option on a nice rental house. You can usually find one with a 1-3 year option to buy. The banks then consider you a homeowner doing a refi, which is easier to do. Plus, it gives your brother time to fix his credit.
Option will cost you about 3-5% of house market value, but you can try and reduce it down.
Try to get rent credits of 30% or more.
He should build his credit through new credit cards (yes, he’ll pay a very high interest rate or go with a secured card for a while). But, he’s got to work through this. Later, a small car loan would further improve his credit.
Talk to a local loan broker and see what they have to suggest.
There are banks that we give loans for people with no tradelines and no score. I assume the house is a single family residence…if so he has a good chance of getting a loan with a few banks that dont require scores.
Thanks for the help. However, Renting/Leasing isn’t an option because of the housing market here were we are looking. Besides we already found the perfect house for him in his price range and near ample employment.
blueprints1971
Thank you for the info. Where would I go about looking for one of these banks?
As I stated, Al intends to pay off the 4K when his funds clear early Feb. However, that will not give him a credit score. Bad credit is not his problem, in fact I’m told that bad credit would be better. The problem is he has NO CREDIT SCORE.
If it were that simple, I would not be soliciting advise. In fact I’m sure one of the many traditional loan people I have spoken with would have suggested that.
If he gets a job in the same line of work, he may qualify for an FHA loan using alternative credit such as utility payments and yes even the mortgage assuming he can prove he paid it with cancelled checks.
With 40% down, many hard money lenders would be willing to do the loan at about 12% without a job
Again with the same down payment and with a job, there are subprime loans of about 9%.
Either option 2 or 3 could be refinanced in about 6 months to a year into a better interest rate.
He should consult a mortgage professional who is familiar with all of these programs.
Also I would suggest that he may want to contact a credit union or small local bank
First of all.
If you just pay off the past debt it will bring it to the present with the credit bureaus and follow him for 7 years. This is BAD.
You need to get it in writing that if you pay off the debt it will be removed.
Next. Find someone with some good credit cards. High limit and very low balance. No late penalties and have had the cards for a long time.
Now have them put AL on their cards. Three should do it. { call the card company and say I want a card with Al’s name on it added to my account}When the card gets mailed to them. CUT it up. it does not need to be used at all.
After the card is issued, the card company during its next reporting period will put that cards complete credit history on his report. They might report monthly or quarterly. Sweeeeeet
Also with his extra cash he should buy a CD and borrow against it. I hear $5000 is the magic number that can really bump up a credit score.
It is not an over night fix. But if he played his cards right. In a few months he could have stellar credit.
I never even thought to request that the negative marks be removed from his credit report after pay off. Thank you.
We have secured temporary housing for him so that he can find a job once he gets out here. Hopefully, the porperty we found will still be available (it’s a foreclosure) when he can finally qualify for a loan.