Purchasing Your First Investment Property with Bad Credit and No Money

I have read that a large portion of the population in the United States has poor credit and nearly 40% find it difficult if not impossible to get a traditional loan using a bank.  Some people have no credit at all.

There are many first-time home buyer programs, alternative loan programs and down-payment assistance offerings to help you.  Let’s look at some options for the different situations.

Low credit score: If you don’t have a great credit score you do have options. FHA loans allow for scores as low as 500 if you can make a 10% down payment. You can also add a cosigner to help increase your chances of getting qualified.

Non-traditional jobs:  If you are self-employed or driving an Uber or a freelancer you may be worried about providing income without W-2s paystub’s. Fortunately, many lenders are offering loans that cater to workers just like you. They are allowing you to qualify based solely on your bank statements and cash flow.

No down payment:  You don’t need a 20% down payment to buy a house. And conventional loans you can pay as little as 3% if you’re willing to buy in a rule area (USDA loan) or have no down payment if you’re a military member or veteran (VA loan).

No cash for closing costs:  There are many closing cost and down payment assistant programs that you can use to cover the upfront expenses of buying a home. These vary by location and usually offered by state housing agencies.

Thanks to the many options it is possible to qualify for a mortgage with almost any financial background. You just need to know where to look.

Have The Seller Finance The Property

It’s one of my favorite ways to buy properties since it requires no bank qualifying and the timeline to purchasing the house is much shorter.  By having the seller financed the house and be the bank you can avoid the lengthy process of loan origination and qualification. Plus, the loan does not show up on your credit which allows you to buy another investment property using bank financing. Why would anyone seller finance their property? Well, there are many benefits to the seller like reduced tax burden, steady income stream, selling the house faster, better returns than bank CDs (certificate of deposit) and possibly getting a higher price.

Buy With Lease Option and Refinance Later

Another strategy is to buy the investment property on a lease option and later convert that lease option to a purchase by getting bank financing when your credit has improved, and you have enough saved for your down payment and closing cost. You would want to get a long-term lease option to give you enough time to improve your credit.