how to get owner financing for multi families?

Question

i dont have the credit history for a loan from the bank.

i think owner financing would be my only solution to purchasing a multi family .

maybe private lenders?

about how much money do i need for a down payment and to use some creative financing to purchase some rental property?

Ryan Gillette · Answer

Even if you have no derogatory (bad) credit, banks want to see that you've actively paid bills on time. If you don't have car loans or credit cards to point to, they will likely want to see your rent history, utility bills, and anything else you pay on a monthly basis. If you're not particularly strong in this department, it could be a problem, even with a 700 score.

Banks only care about the income you show legally. If you now have a legal job, that would be up to the bank to decide whether to use. If you don't have a documented history of 2 years employment, likely they will make you wait 2 years until you do. Basically the period you were paid under the table would be treated as a period of unemployment. If it was only a short period with an extensive history behind it, or you were in school previously, the bank may make an exception and take your current job with only, say, a 6 month history.

Average down payment is seller to seller. Typically it's less the % and more the dollar amount. It has to be some amount you pay upfront where the seller is reasonably assured they won't lose out on the deal should it turn south. There's not a big upside for the seller to finance you unless they won't sell it otherwise or won't sell it for it's current asking price. For most sellers who own the property cash, it represents a substantial part of their overall savings. So if you default, they'll want to ensure your down payment is enough to cover their legal costs and any damage you might have done to the property. $10K+ isn't atypical.

Ryan Gillette · Answer

If you have no credit history, seller financing might be a route while you build your credit profile. The down payment is negotiable between you and the seller, but generally the more you offer the more enticing it is to the seller. If you don't have an especially large down payment, but know you can afford more than the mortgage payment, you could increase the amount of principle you pay. Basically that down payment and any principle you pay is equity you build in the property and less risk you present to the seller - the more you can pay upfront or over the term, the better.

Keep in mind, most sellers won't give you a long term to pay it off. They are not like banks who can afford to lend you big sums of money over 15-30 year periods. 1-5 year balloon notes are not uncommon, giving you the opportunity to get your credit in order.

You may also want to consider a plan for yourself to wait 12 months, build credit, and buy a property using a 15-30 year mortgage through a bank. Overall, there's less risk in this strategy and lower costs (less interest rate, and you only incur one set of closing fees. The first common step to building credit is to get at least three tradelines- commonly credit cards. Even if you buy a pack of gum once a month and pay it off the next day, that's ok. It shows the credit bureaus and later the banks you are responsible about paying things on time. If you can't qualify for a credit card yet, get a prepaid credit card from a local bank and then start getting tradelines. It may seem like a bit of a game, but the intention is to show you can make timely payments.

Devin Mann · Answer

@Ryan Gillette

so i know its negotiable but what % would be average for a down payment?

Devin Mann · Answer

@Ryan Gillette

thanks ryan.

i have a 700 credit score but ive always gotten paid under the table

so the problem i have is that i have no income shown.  Do banks only care about income that i have proved?

this year i will not be under the table any more now that i have a new job.