How to structure mortgage with bad credit?
Question: I would appreciate your help dealing with my poor credit, as I apply for a mortgage on a new house.
Due to simple neglect (I was never short of cash), I have several 30- and 60-day past due mentions on an existing mortgage, with the result that my credit score is 566. That is going to cost me at least three percentage points in the mortgage, like 9.875 is the best I’ve turned up so far.
I am wondering if I can somehow structure a trust (let’s say) so I’m putting down the money and a friend/partner is the one who applies for the mortgage, so his credit is what’s relevant and we get the good rate. I would retain 99% ownership and have the option of buying him out for a dollar, or something.
The goal is to leverage my friend’s good credit rating to get a good rate. I do NOT want to do anything that could amount to bank fraud or anything ELSE illegal, however.
The property is a single-family on a lake in New Hampshire. I intend to occupy it as my primary residence, but not necessarily immediately: I would like to have the option of renting it out for months or years, AGAIN without commiting any bank fraud. If I have to “live there” (weekends only, probably) for a while, before I rent it out, to be strictly legal, then I guess I would do that (and take the cash flow hit of maintaining the house plus my current apartment).
I have a couple properties, one a paid-off condo worth $425,000, and one three-family worth $600,000 with a $190,000 balance on the mortgage. I earn about $120K from my job, plus roughly $50,000 from my rental properties. I am in no way a credit risk!
Any ideas? Trust? Something else?
Answer: Basically, you want it all, and for free. That about sum it up? Don’t drag your friends in to this, pay the high rates for a couple years and then re-fi. As for not living in the property, that is fraud unless you “intend” to live in it for the first year, (per most mortgage agreements). Nobody is going to believe that you let your house payment slip for 60 days. You most definitely ARE a credit risk. You screwed up your credit, now you have to fix it. Do you want your “friend” to suffer from your upcoming tardy payments? You might look at doing a sell-lease-back on the condo that is paid for, or take a equity loan on it and go for a 60-80% mortgage on the new property with a lower rate. One other idea, convince a lender to take the condo as security on the new mortgage at a better rate, or find a private lender to do it. Any way you slice it, you need to pay for your bad behavior, in the eyes of a lender. You didn’t mention how much is the sale price? your down payment? Are your self-employ people? We may have a program for your new house
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