TB W/rough Credit - How To Advise?
Hi - I have a tenant who has always paid on time who is interested in buying the rental he is in.
However, he says he has been behind on his truck payment a couple of times and that his credit is shaky. I wish I knew the score, I don't, but advised him to pull it else it's hard to get advice from people!
What are some ways to improve a credit score? There is no "fire sale" on this home, we can wait 6 months while they pull it up. I've heard of starting off with a gas card, and paying it off every month, then a credit card and doing the same (or at least, making good payments).
I have also heard of asking for a personal loan from a bank, holding the $$ in a savings account for a month, then paying the loan back, then repeating the process with a different bank, and then again a third time, so it shows that he has pulled loans and satisfied them. Does this work? How much would it help the FICO score?
Thanks!
-Grey
Yo whats up. I am doing the Personal loan thing but a different way. ( I went to a credit union open a savings account then put into it $500 and ask for a shared secured loan and got the $500 right back. The loan hit my credit report within 30days or less. I made about two payments and it lift my fico score 20 points.) 8-)
20 points is good, and that didn't take long, either. I will mention it to them, we have two good CUs here.
Here's an idea:
Do a purchase contract with him, so that he is buying the house from you. You are now the bank. Apply his monthly rent to the down payment. So now, he is gaining equity in the house.
After you owner-finance for a year, he can go and re-finance the house in his name rather than take out a first mortgage.
If he stays on track and you vouch for him to the banker, he will have a much easier time.
Also, over the next year he can continue to build his FICO.
I just did this very deal.
Do you have good mortgage broker you are working with? If so refer your tenants to him/her and see what kind of loan they can get. That is, above all, the first step.
If they can't get a loan have the mortgage broker give them an action plan of what they need to do before they can get a loan.
Next tell them that you will continue to rent from them and that if they give you 1-2% down, you will give them an option to buy.
Writergig's got I right, I think...
If they're solid renters, then sell to them on a CFD. It helps you, since you get a good rate of return. Also, they are now responsible for all repairs. Helps them build credit and buy the joint. Lease option could work as well. I guess that depends on which is the preferred method down there...
Jeff
Thanks everyone.
Can I find a purchase contract (a decent one) on the internet somewhere? Or is it better to hire a lawyer?
Does this make it harder/impossible to do a 1031 exchange, even if it is still a tenanted property, after a year of holding the mort. for someone else?
Can the current terms of the lease be changed/resigned, for a purchase contract, without causing any confusions with lenders later?
How hard is it to act as a bank? Never done it before, not afraid to try. What paperwork is involved, so when he goes to refi, everything checks out?
Currently the mort I hold is 300/mo, he pays $650. So do I write it up as $300/mo of his rent goes toward dwn payment,? Can I choose how much of the rent goes to it, say $100, so we are still gaining a little on this property until it comes time for the refi?
Thanks to all.
Grey
Quote:
On 2005-01-10 21:44, writergig wrote:
Here's an idea:
Do a purchase contract with him, so that he is buying the house from you. You are now the bank. Apply his monthly rent to the down payment. So now, he is gaining equity in the house.
After you owner-finance for a year, he can go and re-finance the house in his name rather than take out a first mortgage.
If he stays on track and you vouch for him to the banker, he will have a much easier time.
Also, over the next year he can continue to build his FICO.
I just did this very deal.
In your last post, you ask about a dozen questions...this tells me it would be worth a visit with a RE attorney to work through this deal.
As I mentioned before, I did this kind of deal and it was a great investment...but only your counsel can tell you what's best for you.
Good luck..
W