Today I’m answering your questions about how to get approved for a home loan, and the topics I’ll be covering are:
- The Challenge of Getting Approved for a Home Loan
- Conventional Loan Credit Score Requirements
- Buying a House With Bad Credit vs Good Credit
- Getting Owner Financing for a House
- An Alternative Way to Buy a House
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The Challenge of Getting Approved for a Home Loan
I’m Ted Thomas, and I’ve been involved in real estate as an investor, buyer, seller, and educator for over 30 years. Everyone wants to create wealth and live the good life. I’m sure that’s one of your goals, and I can tell you that you’re in the right place.
Today I’m answering your questions about how to get approved for a home loan. That sounds fairly simple, and it’s common for most young couples getting started to borrow money to invest in their new home. The challenge always is having a good credit score and a history of using credit correctly.
Conventional Loan Credit Score Requirements
If you want to know how to get approved for a home loan, that means you want to borrow money.
Under normal circumstances banks require a 20% down payment, but under certain circumstances, banks will use government loan programs which require only 3.5% down payments.
Lenders are constantly evaluating loan applications, searching for the proper income and credit scores and for people who will repay the loans they’re willing to make.
Credit scores are critical when it comes to approval. The bank doesn’t know you, so they check on your credit history and end up giving you a grade. 25% or more of the applicants fail because they have a poor credit score, a low grade, below the bank’s standards.
I’m not a credit expert, but I did check and found that those who have credit scores of 500-580 and below are unwanted at the bank, and their chances of approval for a home loan are slim to none. That doesn’t mean you aren’t able to buy property, but it does mean that you’re more than likely not going to be able to get a traditional low-interest loan from the bank.
Buying a House With Bad Credit vs Good Credit
Let’s talk about how to get approved for a home loan. Is it possible with poor credit? Buying a home with bad credit and no down payment or with a small down payment is not impossible, however, it is costly. In other words, there are people other than the bank who will lend money, but they’re also going to charge more money, meaning higher payments.
Government home loan programs are there, and they lend to people with iffy credit situations, however, they cost more.
Here’s an example of the difference between a good credit loan and a not-so-hot credit loan.
A $200,000 loan for 30 years with good credit may be as low as 3%, and the payment would be $843 a month. Over the 30 years, the borrower would pay a total of $303,480.
That all changes when the credit score isn’t so hot.
This individual borrows $200,000 except the interest rate is 5% with a monthly payment of $1,074. Over the 30 years, this individual is going to pay $386,640.
That’s a whopping $83,000 MORE. Not 2% like everyone thinks, but an incredible 22% more because of the bad credit.
My point is credit scores really matter.
Low credit scores can be improved. I’m not exactly in that business, but you need good credit. If yours isn’t good, then you need to work on making it good.
Getting Owner Financing for a House
I’ve been in the tax-defaulted real estate business for decades, and we make a business of helping people who for one reason or another have fallen into some type of crisis. They haven’t maintained their payment schedule or they may not have paid at all.
The question comes up regularly, what happens to people who are searching for loans and have had a divorce, lost their job or haven’t handled their credit correctly? What do they do if they want to know how to get approved for a home loan? Is there another way?
People still need a home, which brings up the question, is owner financing a good idea? For people with difficult credit problems, the answer is, yes, owner financing is a solution. However, it’s not going to be cheap. It’s not going to be a low-interest loan.
If you’re a real estate investor, understanding the situation can put you in a position of solving problems and generating money. I’ll explain.
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An Alternative Way to Buy a House
As I stated, I’ve made a career over the past 30 years in a subset of the traditional real estate business called tax-defaulted real estate. It’s no different from traditional real estate but with one big exception. The owner has defaulted on paying property taxes.
Over 3,000 counties across the United States auction somewhat used and abused properties, buildable lots, small apartment buildings, offices, and farms. They all end up at tax auctions for defaulted property taxes, and these auctions are open to the public.
At tax defaulted auctions, the pricing starts at just the back taxes and property is sold to the highest bidder sometimes for 10-20 cents on the dollar of the tax assessed value. Additionally, the tax collector will extinguish the mortgage or trust deed loan as a part of the auction. In other words, the properties are sold without a home loan.
Nationwide, millions of tax-defaulted properties are auctioned to savvy investors. Imagine buying real estate at a tax sale auction for 10 cents on the dollar with no mortgage, then reselling it for 60 cents on the dollar.
Conventional thinking says you need a lot of money to make a lot of money, but you don’t need a huge bundle of cash to make a six-figure income with tax defaulted property investing.
Conclusion
We hope you enjoyed Ted’s lesson, “How to Get Approved for a Home Loan.”
A lot of people want to know how to get approved for a home loan, particularly if they have poor credit or little money for a down payment. You can certainly work on improving your credit score, however, there are alternatives to conventional bank financing.
Owner financing is an option. The home seller can act as a bank and finance the home to the buyer. There are also government programs that offer financing and require a down payment of only 3.5%.
Then there is a little-known way to purchase a house without a mortgage for pennies on the dollar, and that is buying tax defaulted property at county auctions.
If you’d like to learn how to reap huge rewards from tax delinquent property investing, Ted Thomas provides full support and complete training with home study courses, Q&A webinars, live tutorials, workshops, web classes, and personal coaching with certified coaches.
Get started today by taking advantage of this Free Gift from Ted. Act now, it costs you nothing and will give you a big head start!
Ted Thomas is America’s Leading Authority on Tax Lien Certificates and Tax Deed Auctions, as well as a publisher and author of more than 30 books. His guidebooks on Real Estate have sold in four corners of the world. He has been teaching people just like you for over 30 years how to buy houses in good neighborhoods for pennies on the dollar. He teaches how to create wealth with minimum risk and easy-to-learn methods.
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