Buying Realty With Bad Credit Score

"What is Your Credit Score?"

"Seriously!"

"Uh...Huh?"

Realtors can waste a lot of time working with buyers that will never be approved for as big of a mortgage as they need to buy the large, impressive homes we are being asked to show them.

You could be driving them around for weeks looking at houses that are way out of their reach.

All Realtors should be qualifying their new client leads before you start working on their behalf.

Yes, take clients with bad credit but let them know that they have some credit repair work to do before they will be able to get financing for the properties they want to look at.

There are ways for in-debt or bad credit history clients to purchase and rent property. You have to ask renters if they are ready to ask someone with good credit to co-sign on their lease or sign on to their mortgage, when they are buying or leasing property.

A Realtor should give clients with bad credit scores the truth. You have to play straight with someone who is trying to live beyond what they can afford. You cannot just keep helping people find properties that they cannot afford. But it is also your job to suggest solutions for your client to get the funding they need.

Telling someone they were not approved to rent an apartment due to their bad credit history is not easy. Know that some locations have laws on how you can turn down renters. Learn your areas laws.

Never violate a law when discussing a client's credit score. but if perhaps you know of a lower rent apartment they would qualify for then suggest they see the cheaper location.

If your client might qualify for a mortgage if they were willing to pay a bigger downpayment, tell your client their options. Maybe the client has a wealthy relative that is willing to lend them or give them the money for a larger downpayment.

Every successful Realtor has a list of go-to lenders that specialize in giving out loans and mortgages to people with questionable credit scores and bad bill paying histories. These lenders are willing to take a chance because they charge a higher interest rate and they intend to set terms that are extra favorable to them as the lender.

Remember that the lender puts a lien on the property that's being bought so the property is collateral in case the borrower defaults and cannot pay the loan payments.

Many buyers are willing to accept the high interest rate loan if it gets them living in their dream house.

"To contract new debt is not the way to pay old ones." - Warned, President George Washington

Buyers need downpayments to purchase property. As a Realtor you should let them know the amount they will need before they make an offer. Compute what their mortgage payments are going to be for them and add in monthly insurance payments and taxes too so they know exactly what they are getting into.

It is unethical for a Realtor to push for a sale when they know their client will be over extending themself by purchasing a property. I know you want your commission but your buyer client is going to struggle to make the mortgage payments. Try to find them a smaller house or a less expensive home or a house in a less expensive neighborhood.

If your client is handy perhaps they would be happy with a fixer upper that will cost them a lot less.

Often when credit scores are the issue, you can convince the seller to offer an owner finance deal for your buyer client.

Owner financing is when the seller gives the buyer the mortgage usually because the buyer has been turned down by their bank that they asked for financing. The buyer then makes payments to the seller instead of to a bank or traditional mortgage lender.

The mortgage for the owner financing is usually set up so the seller gains the same interest rate that a bank would have charged. Thus in the end the seller will get more money because they get the sell price plus all the interest that would have gone to the bank.

Your buyer client can always repair their credit score over time by making all bill payments on time. If so, they could refinance in the future gaining a lower interest rate and securing better terms with a traditional bank or lender to pay off the seller who holds the original mortgage.

Everyone wins. The sale goes thru at a timely fashion. The buyer gets the home they want and the seller sells their house. You collect your commission. The buyer works on fixing their credit score then refinances the loan which is used to buy out the original owner financed loan.

The seller of course has a lien on the property just like any bank or lender would. If your buyer client can't pay their loan payments, the seller gets their property back and keeps any monthly payments that were made.

You are going to get clients with bad credit scores. They may not even know they cannot qualify for a mortgage until they are turned down by a lender. Realtors need to know what is possible for bad credit clients to do. Always be honest with a bad credit client.

Tell the bad credit client their options. Do not assume a client with a terrible bad credit score will never be able to buy the house that they have fallen in love with.

People will surprise you with their ingenuity when they are passionate about acquiring something, especially Real Estate.

IMPORTANT: Know that there are FHA loans available which are affordable mortgages backed by the Federal Housing Authority which is a part of the Federal Government's Department of Housing and Urban Development, HUD. You can find info for getting Veteran Loans, Loans for Seniors, Loans for Native Americans and Loans for many other Financially Challenged Citizens too.

The point is, do not give up on a client that has some financial problems. A Realtor's job is to try to help clients of all economic standing find properties to buy and nice places to rent. If your client need government assisted housing, steer them in the right direction.

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