Hey everyone, I am 19 and am looking to by a smaller single family or duplex with the intention of buying and holding. I've done my research and feel I understand enough to make the leap, however the only obstacle left is finding financing. I am young with no credit and currently "unemployed".. (I work for myself flipping cars). I've been looking at properties in the 40-90k range, and currently have enough cash to make a down payment on a ~10% HomePath loan. However, my questions:
Would I even be considered for a loan given my age/"employment status"? Would I even be considered given no credit history? If these answers are no, are there any suggestions/solutions as to how I could find financing?
Thanks from a newbie,
If it helps, I should include:
I currently have about 15k in cash to work with. I am not averse to risk because I would rather learn and make mistakes now than later.. I understand properties in the 40-90k range would almost always some rehab, however I can finance rehab costs in other ways.
I am no expert, but I'll give you my 2 cents.
No credit is better than bad credit. I'd pull a copy of your credit, you can do it for free and really see what you are looking at. I've seen ones that will do your credit score free to, but I can't remember the names.
If you truly have no credit, get a credit card or two. Make small purchases on them and pay them off every month.
Your work history is going to be a problem I would think. Have you been paying taxes on income you've earned for the past 2 years?
You may be a good candidate for an owner finance deal.
Thanks Shawn, I have had a decent, tax-paying job until around six months ago, when i decided to work for myself. I legally did not pay taxes for the last six months while earning money. It's nice to hear no credit is better than bad credit, I'll most likely get a credit card to start building credit soon.
@Account Closed in that getting a credit card will do you well in establishing credit. Get one with a limit of 1k and use it to buy EVERYTHING -- then just pay it down to a few dollars, always keeping a balance. I did that for a few years and my credit score is very good. You should look to establish credit for about a year.
As for income -- I'm assuming you don't have proof of it (i.e. taxes). That's not a big deal but you should look to get something on the books if you want to consider traditional bank financing. Look at a year of established income for this as well.
In the meantime, I'd drive one of the cars you fix up around the neighborhood looking for for sale by owners and finding out if owner financing is an option. Keeping in mind that the owner (in this case also the lender) may ask to pull your credit that which doesn't exist for you so you may find yourself enticing them with a larger down payment than otherwise necessary. You could also find distressed properties and try wholesaling.
Just some thoughts for you. Good luck
You're a real estate investor. Your deals should be based on the real estate property, not your personal credit, so start thinking that way. It's all about the numbers of the deal: does the deal you have in mind either create enough cashflow to cover the monthly costs (PITI + maintenance + property management for buy and hold) or does it produce profit for a buy low, sell high flip. I have several investment models that use 100%+ finance (1st mortgage 70%- 96.5% LTV and the 2nd mortgage is the balance + closing costs). The most important factor is the deal, not the person. Email me directly for more information. Find the deal and let's make some money!
God Bless You!
Axel Ragnarsson to qualify for traditional financing you need a 2 year history of being self-employed (possibly as little as 12 months with great compensating factors, but a lack of credit history will not help).
You'll need at least a 620 credit score for a Conventional loan, and 15% down since HomePath is going away October 7th.
Ideally you should have at least 3 open trade lines that have been open for 12 months, so I recommend opening 3 credit cards today to start building credit.
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