Filed under: Bad Credit
Question: Not on foreclosure, unless the arrears are less then $3000, although sometimes if you get them at just the right time they might sign a quit claim if the numbers are there and you flip to Investor. For example recently came across foreclosure where Deed was acquired for the $2000 forbearance and a small promissory note. Its the timing that is tough and do do Due Diligence. Have you considered investing in Notes, I know someone who could put that to work for you buying bad credit card paper. Hope that helps. I was wondering if anybody was out there that uses their IRA to fund their >foreclosure projects. If so what could $3000 help me out with??
Answer: Starting with 3000 is pretty small. I like your idea of $2000 forebearance. It would have to be a property with a good amount of equity. The problem is how would I be able to fix up the property with my money and then sell the property or rent it out and put the money back into the IRA?? From what I understand is that you can’t mix the money from your pocket and the IRA pocket, is that correct?? If you can find a property for $3000, you would need to resell to an investor “as is” or as a “fixer-upper” for a profit. In this way, you could pay back the money you borrowed and still have a nest egg to reinvest. Another avenue would be to “lease option” the property for a non-refundable option consideration of,say, $3000 – $5000, depending on the length of time of the lease. Whether the buyer exercises the option and purchases the property or declines on the option and walks away from the property, you still keep the consideration fee.
January 1, 1970
Question: Recently, I have gotten into big trouble with my credit cards. I am currently working with credit counseling to negotiate lower terms for all six of them. Many have already been handed over to collection agencies as they are 6 months past due. Not that it matters, but I “had” a gambling problem. My question is this:
I want to sell my condominium in about 1 year and buy another less expensive condo in another part of town. My current mortgage is $150,000 at 6.8% and I pay it on time. The new mortgage will hopefully be about $25,000 less. How difficult will it be for me to qualify for another mortgage because of my tarnished credit report? I hope to profit about $50,000 from the sale and use the proceeds to pay down my debt, credit cards included. Next, if I don’t qualify on my own would a co-signer help the situation any? Thanks, so much!
Answer: Be very careful here, you may have to use up a one-time-only tax exemption (usually used when someone retires and doesn’t buy a replacement home but rather goes into an assisted living facility) or else pay capital gains on any profit from the previous condo (and roll-over profit homes owned prior to that one). Talk to a tax specialist FIRST. This is copied from our web site: In recent years, Consumer Credit Counseling (CCC) has become increasingly popular. These organizations are also sometimes called “debt management” or “debt consolidation.” CCC companies offer to consolidate all of your consumer debt usually credit card bills into one payment at a lower interest rate, often around 8%. CCC contacts your creditors, who will often lower the interest rate and monthly payment. You pay CCC, they subtract their fee (usually 10%), and the balance is sent to your creditors.
“Non-Profit” is far from free Non-Profit simply means all the money collected by a company is dispersed to its employees and board members. The fees that Consumer Credit Counseling charge are often very large. Many people find that even though their payments to creditors have been lowered, they end up paying the same or more each month after the hefty CCC fee is added (After 8% interest to the creditor plus 10% to CCC, where is the savings?)
CCC companies earn a commission from the creditor on most of the debt you repay through them. Consumer Credit Counseling was established by Visa back in the eighties when customers started having trouble making payments. Creditors know that people who enter CCC have money problems, and they are happy to be able to collect whatever they can, instead of charging off the balance. Although CCC may reduce your interest rates, they generally do not reduce the balance owed. At best, you just lengthen your repayment period.
It hurts your credit.
When you enter a CCC program it is noted on your credit report. Although the rating is not as bad as a bankruptcy, it may as well be. CCC can make your credit scores drop below 500 and your accounts can become rated a “7.” Bankruptcy and charge-off accounts are rated a “9.” You are generally not going to receive decent terms on a loan with ratings over a “3.” Most lenders will reconsider you for traditional financing after 2 years discharge from a bankruptcy and some re-established credit. CCC will be on your credit from 7 to 10 years and lenders are not as willing to give you a second chance after CCC, as they are after Bankruptcy.
They are notorious for not making your payments on time.
You pay the CCC company, and they pay your creditors. We have received several reports from clients that payments were not sent to the creditors on time, adding late fees, additional interest, and more bad credit to the account. Please read this Business Week Article.
If you are considering entering CCC, first try to negotiate with your creditor directly. Tell them that you are on the verge of bankruptcy and ask them to reduce your payment and/or interest rate. Speak to a supervisor before you take “no” for an answer. If you file bankruptcy, they will likely get nothing, so often they will make surprisingly generous concessions.
Of course, it is best to not allow yourself to get into this situation. Proper debt management can make a huge impact on your net worth. Opening bank accounts, retirement accounts, homeowner’s insurance, life insurance, automobile insurance, and even being hired or promoted can all be affected by your credit standing.
January 1, 1970
Question: After leaving the Army 4 years ago I had to make the hardest decision of my life. While I was in the service I accumulated ALOT of debt, and when I got out reality slapped me in the face. I had no other option than to file forkpyo, alImon tesbmself. I’ve recieved a couple of credit cards and even got an auto loan recently. I am VERY gun shy now of credit and how out-of-control itne WHich brings me to my quest ion. I would REALLY LOVE touy a house, however I don’t know what factors the mortage companies look at. Of course I’m sure they look at the obvious credit, debt to income ratios, job history, $$$ DOWN, ect…., but what can I expect if I try to apply for my 1st mortage? Is there anyone else here who has gone through the same thing? I came across a customer of mine who mentioned to me that she had filed bankruptcy, and she got an FHA mortga ge shortly after. I didn’t feecomfortableenh about my history so I left it at that. I also read somewhere abuauy that was done and the rearchers came t o the conclusion thapeople who did file where actually a lower credit risk because they usually re-establish themselves and don’t make the same mistake again. How true can this be? Now that I have started re-establishing myself, my new credit is perfect and paid on time. Been at my job for almost 4 years and aslo my wife. We make decent money, and have a low debt to income rati o. But that big “B” is my history. I also have VA benefits if that counts at all?!? WHat can I expect OR what courses of action should I take. ANY advice/help would be GREATLY appreciated THANKS!!!!
Answer: If you have reestablished your credit, have no 30 day lates on your credit report(s), your income is documented and your bankruptcy was discharged more than 3 (or for some lenders only 2) years ago you should not have any trouble with conventional financing. I would stay away from the companies that claim to fix your credit – 99% of those I (and our attorney general) has come across have been crooked. Pick up a copy of Detweiler’s book on Getting and Fixing Credit – I don’t have the exact title.
Reestablish some credit – use it responsibly. A bankruptcy four years ago shouldn’t stand in the way of your getting a mortgage.
January 1, 1970
Question: I have a couple of questions, and thought that this is a good place to look for answers. Sorry if this is long… In 1998 my wife and I bought our first house. Our credit was “less then stellar” and we didn’t have 10% down. So we did a deal with a mortgage broker where we got 100% financing. One mortgage was for 80% of the loan, the other was for 20%. the purchase price of our house was $130,000. We bought the house in March of 1998, and then in October of 1998 we went to The Money Store to get a home improvement loan. That loan was only for $13,000. The reason we did this, is because the house was in dire need of a roof (we knew that when we bought the house) as well as some cosmetic work (paint carpet, floors, landscaping, etc.). Now, this seemed like a good deal. We figured that within a couple of years we would just re-finance them into one. Skip to August of 1999. Our first attempt at Re-financing the house. The lender tells us, that, “because the home improvement loan is less then a year old, we can’t re-finance it yet.” So we wait…. In January of 2000, we went to a “credit counseling” service to get our credit cards paid off. Shortly thereafter, we go to get our mortgages refinanced into one. But this time we are told that we can’t, because we are in “credit counseling” which the bank see’s as bankruptcy. We hell, if we can’t re-finance, then we might as well file bankruptcy. The credit card companies who were so willing to take our interest payments, were not so willing to work out a deal to get their money back. So we filed Chapter 7. Now, we kept the house(3 mortgages), and both cars. But now we didn’t have any credit debt. Bankruptcy was final in late august 2000. Skip to August 2001. We were told, that we could refinance the house a year after the bankruptcy. So almost a year to the day, we go through the motions. Total of the three mortgages is $140,000 and some change. We have the house appraised…appraisal comes in at $156,000. Bank says, that because the chapter 7 is only a year old, they can only refinance 85% of the value of the house. So, now we still have 3 mortgages, and one of them bumped up their interest rate right after we filed bankruptcy. Almost as if to say… “we got you by the yam-bag now buddy!” So now with taxes and insurance, our house payment is almost $1800 a month. This is almost half of my take home in a month, and I need to get it lowered. So now my wife and I are seriously thinking of either selling this house, or just letting it foreclose. I don’t really know much about foreclosure, but I would rather not let it get to that. Selling it could take up to a year, and I don’t want to wait that long. I make 60K+ a year, and have been in the same trade for close to 16 years, with 7 of those years at the same job. Where can I go for help. Can I refinance now? What happens if I foreclose and what are the legal ramifications? Any help and advice is greatly appreciated.
Answer: Well in 20/20 hindsight I can see that you made a few mistakes. First: If you knew that the house needed a new roof then you could have negotiated with the seller to have it fixed when you bought the house. Best way to do that would be to negotiate a repair allowence as part of the selling price. This would give you money after closing to fix the roof that would come out of the first and second mortgages.
Second: Getting that Home improvement loan so soon was a mistake.
3rd: Getting credit counseling. You should try out your negotiating skills on your own and talk directly with your creditors.
4th: Fileing for bankruptcy made the situation even worst.
Foreclosure will make things even worst. Your best move at this point is to try to live with it. It won’t be easy. After a while your credit score will get better and you will be in a better position to refinance.
Beware of forclosure. If the bank doesn’t get all the money it’s owed, they can file a motion to collect the remainder. It’s called a deficentcy judgment. For the legal advice, you really need to talk to a lawyer. The one who handled your bankruptcy ought to give you a consulatation for a reasonable fee. You need to discuss deficiency judgments and the possibility that you won’t be able to protect other assets or your income through bankruptcy if the lender seeks one. If the lenders foreclose and take a loss and they can get a deficiency judgment (your lawyer can tell you if they can), you still get stuck with the bill for the difference between sale price and the amount you owed plus expenses. The mortgage companies will try to get the best price they can, but the fact that the listing will have ‘as is’ in it (all foreclosed property listings are sold ‘as is’) will lower the price it brings. You would be much better off to be in control of the process. Additionally, you will be able to protect your credit as it rebuilds.
If there is any way to do it, the best bet is to keep your payments up and keep the property up for another year or two. Frankly, and as someone who has had credit issues I’m not being judgmental here, anyone who tells you that there is an overnight cure to bad judgment in the past with regard to credit is trying to sell you something. Whether it’s a mortgage broker with a great deal on a refinance, a lawyer touting bankruptcy or a ‘nonprofit’ credit counselor who tells you (wrongly) that he’s protecting your credit rating. (BTW, CCCS is actually worse for your credit than bankruptcy when applying for a mortgage – probably at least partly due to the fact that you can only do a bankruptcy again after a certain time passes.)
If you can’t keep up the payments, you need to find a real estate agent who specializes in ‘loss mitigation consulting’. You’re lender may be able to recommend someone. You may end up owing after the sale is complete, but you have the opportunity to negotiate up front and maintain some control over the process. A ’short sale’ or other negotiated settlement will also be less damaging than a foreclosure to your rebuilding credit (though it will still be a negative credit item.)
January 1, 1970
Question: Which is more damaging to ones character: Filing for bankruptcy after several bad debt charge-offs; or settling on the bad debt charge-offs and not filing for bankruptcy. Which one is perceived as more responsible? Seems to me that not filing for bankruptcy leaves the door open to be accused of being a deadbeat while filing for bankruptcy appears as if circumstances were beyond my control. What are your thoughts? Thanks!
Answer: Here in the US, once your bankruptcy is discharged, you are deluged with pre-approved credit cards, can get a car loan immediately (albeit at a high interest rate), and most people can get mortgage loans in 2 years or sooner. . at a much higher interest rate. And lower limits. You are always better off discharging your debts by paying them off, even if you have to make arrangements to pay them off slowly. Bankruptcy will affect your ability to get credit for anything at reasonable rates. Mr. Weiss is not telling you a very complete story, and appears to be advertising for your business. Lenders of today, unlike those of past years, don’t care that you are making the effort to pay your debts. They make lending decisions based on computer models and credit scores, and often a human doesn’t even see your application (other than the data entry clerk who types it into the database).
There are several problems with slowly paying off your debts. First, there is a substantial expense in doing so. You could spent tens of thousands of dollars in payments over a number of years, with the interest, late fees, overlimit fees, etc. continuing to accumulate, or file for bankruptcy, pay the creditors nothing, and move on.
Second, your credit rating will stink while you are making these payments, which often takes 3-5 years or longer. During this time, many people won’t be able to qualify for a loan (car, mortgage or other) at *any* interest rate. The impact of a bankruptcy filing diminishes each month after the discharge is entered.
Given a choice of paying a higher interest rate and being able to get a mortgage or car loan for less, or not being able to borrow at all, I think most people would opt for being able to being able to get the loan.
As far as my “telling a complete story” and “advertising for his business,” you might want to look at the archives of this newsgroup (alt.bankruptcy) to see whether I have told posters the “complete story”. My “advertising for the original poster’s business,” as you call it, isn’t too good–I have no idea where he lives, and it’s 25 to 1 against the possibility that he even lives in a state where I’m admitted to practice, even if he decides to file.
January 1, 1970
Question: I’m considering loaning money to someone to purchase an investment house. The loan will be 65% of the house’s appraised value, and the borrower will not be living in the house (he intends to fix it up and resell it). Question: In the unlikely event the borrower declares bankruptcy, will I still be able to foreclose on the house?
Thanks.
Answer: No, not at all. AND , it is possible that if the debts exced the assets that even though you are ’secured” that you could end up with a judge that drops your lien down and you get less than was borrowed. PLus, interest cold be dropped.
I had a balloon on a note due and the guy declared bankruptcy. the judge felt sorry for this poor guy that was left out of the boming economy (He decided he didn’t want to work, so stoppped for 8 months and then built his house on the lot he bought from me. the judge ignored that, and took all the unsecured credit cards and dropped them to ZERO payoff. This man had his house built for FREE because he bought all the lumber, appliances and trades on credit!) and said that my balloon for the lot was now to be amortized over 10 years. Period. And, my 10% interest rate would be dropped to 5%. Period.
The courts suck when it comes to bankruptcy. People play it all the time. SO, yes, you can lose out. the only thing that didn’t change for this guy was the real estate tax liens. they remained intact, remained at full price, and remained at 16%. That’s why I like borrowing from my HELOC at 4% (prime) and buying tax liens at 16%. 
There may be a way to avoid loss, at least in some places. About 10 years ago I sold a house and took back a mortgage (“vendor take back”). The lawyer set it up so that, if the buyer later stopped making the payments and declared bankruptcy, I would still get the house back. This was in California. Maybe it is different in the case of lending the money to someone to buy a house rather than a vendor take back mortgage, I do not know. I cannot remember the details, but it may still be possible to protect yourself. Ask a lawyer. More or less, yes you can. However, there are some things to understand about a bankruptcy.
When a person files a bankrupcy (which is in federal court), all legal actions the person is involved in are stayed until the bankruptcy is complete. At the completion of the bankruptcy the bankruptcy judge will issue a final order, which will include orders to the judges of the other cases how they must decide the cases. In other words, if you foreclosure and the borrower files a bankruptcy, the foreclosure action is essentially removed from the local court and thrown into the bankruptcy court. Your foreclosure will still be successful, but there may be a delay because everyone has to wait for the final word from the bankruptcy judge.
Note that in a bankruptcy there are two classes of creditors: secured and unsecured. Secured parties are allowed first dibs on the collateral, i.e., if you have a first mortgage on the property you get the proceeds from the sale by the receiver in bankruptcy. After all the secured creditors get whatever their collateral brings, the rest of the debtor’s assets (including any surplus that the mortgaged property brings above the mortgage amount) are shared by the unsecured creditors.
January 1, 1970
Question: I need a lender or private investor to fund high interest 2nds, I have a lender in place that can lend 60-65% and I am looking for a 5-10% 2nd with bad credit
Answer: >I need a lender or private investor to fund high interest 2nds, I have a lender >in place that can lend 60-65% and I am looking for a 5-10% 2nd with bad credit
January 1, 1970
Question: I was watching TV the other day, this guy was telling about being able to buy real estate with no credit check, no money down, and how to get rich buying, How could this be legit, there is no way to buy a home if you have any kind of bad credit ! Does any one know anything about this? If it was that easy, every realtor would be buying up everything !
Answer: Yes. There are a few deals like this still floating around. It is legal and depending on your financial resources you can do it in most U.S. counties. I have done it for clients myself and it takes time and work like most good things. The reason it is becoming rare are due to law changes and abuse. I recomend you buy the course and read, follow up ask many questions and trust in your commitment to excellence. Yes George, it is possible. It’s just not possible to do with every property that is out there. What he’s not telling you is that all of these techniques require you to locate a seller who is motivated to do a deal with you to get the house funded and sold quickly. It might require him to carry paper, sell some note payments at closing, give you an option to buy in exchange for some equity on the back end, etc., etc.,
There are dozens of ways a no-down or bad-credit deal can be swung, I do them every month. You just have to know how to actively look for and identify a deal that can be done this way. Keep in mind that, as he’s parading out his smiling course purchasers with glowing testimonials about how their net worth grew in two months using the techniques he’s talking about, that little “bug” is down at the bottom of your screen reminding you that, “These results are exceptional. Your results may differ from those shown here.” It’s not uncommon to see these same people, six months later, having their “increased net worth” go under the gavel at a foreclosure auction. People get bit when their actions take them where their experience base doesn’t know what things are likely to bite them or from where the bite can come!
January 1, 1970
Question: Unfortunately I had a charge off a year ago, and have a VERY bad credit rating….All my bills are now in order, and I’ve done my homework on a property that’s $89,900 and monthly rent of $1300(duplex)…….I have $15,000 to put down, and after a 7 1/2% mortgage AND taxes, I’ll have $450-$500 POSS. cash flow……….Does anyone know how I can get a mortgage?……I also have $102,000 equity in my primary residence……and NEVER a late payment on mortgage…..can someone help w/ ANY info..
Answer: In answer to your questions,
To be able to buy now and finance (and make the down payment ) later, consider this (and we can do it all for you, if you wish):
Have the seller agree to let you take over his current loan payment for, say, two years (we provide a safe, legal and most effective way to this without violating the lender’s Due-on-Sale Clause, and jeopardizing the title).
You agree with him/her that you will put you own loan on the property at the end of that period, and pay him then all of his beginning equity (whatever equity he may have had at start following your $15,000 contribution). As a further incentive, you might even offer him a portion of the appreciation that would accrue over that 2 years, if you felt like it).
Then follow these steps: 1) place the property in a title-holding land trust in his own name (we can do that for you, or you can find an attorney on your own), 2) You become a co-beneficiary in the trust, and 3) you lease the property from the trust on a ‘triple-net’ basis [IRC# 163(h)(4)(D) then gives you all the same benefits of ownership that any owner of real estate could ever have.
By this procedure, you end up with 100% (ALL) of the benefits of ownership, including use, occupancy, equity build-up, appreciation, full tax write (for the existing mortgage loan), saleability, transferability, quiet enjoyment, etc. (ALL THE RIGHTS WITHIN THE BUNDLE OF RIGHT IN FEEE SIMPLE OR FEE DEFEASIBLE REAL ESTATE OWNERSHIP). There is no due-on-sale violation; there is no chance that either party’s (buyer or seller) lines, suits, judgements, BK’s or other legal action could ever affect the property’s title.
Before you do any of this buy the book, “NO NEW LOAN!” by Bill J. Gatten (It’s good– I wrote it m’self) $16.95+tax and shipping
It’s a Best Seller (for me, anyway… it’s the only one I’m selling)
January 1, 1970
Question: I coughed up the $200 bucks to buy a late night real estate course becuase I had bad credit and no cash. I haven’t been able to buy 1 house so far because everybody seems to want a credit check. Once they see the credit, they basically slam the door.
What am I doing wrong????
Answer: So far, you have not found anyone motivated enough to do business with you. There are two possiblities that I see…first, you may not have looked hard enough. Second, the current economy might make it such that there are very, very few people highly motivated to move property.
I think you should run through the course again. You have run up against a problem. Logic would tell us that banging your head up against this problem over time is not going to help, all it will do is give you a headache. If a good credit report is your problem, then find a good credit report to bring to the deal table. You can do this in a number of ways. First, you can find an investor to back you up. Second, you can find a partner to do the deal with. Third, you can form a corporation, and then establish clean credit for your company. There are a lot of people out there that would like to dabble in real estate, but who don’t have time to look for properties themselves. Ask around at your local investor’s or real estate association meeting. Follow the money. Ask everyone.
Your next goal should be to clean up your credit and save up some money. It is so much easier to buy that first property when you and a partner can each kick in 10%. Once you get rolling, things keep getting easier. I worked far harder the year that I made $8,900 than the year that I made $200K.
January 1, 1970
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