Bad Credit Mortgage with Big $ downpayment

Your best bet is to find a GOOD mortgage broker in your area. A good one can do tremendous things. Ask friends, co workers, etc. who they've used and who was good for them.

The current "subprime" mortgage climate will make your situation even tougher (as for securing a mortgage), but with a down payment of 50% or more, you should be able to secure one. However, many of the larger lenders in this market are clsoing daily.

Never overlook the obvious, talk to your bank, and be open about your situation. You never know until you ask.

Again, seek out a good mortgage broker, they can guide you through the entire process as well.

 

Tough question, but my (SWAG)guess is somewhere in the wide range of 9%-12%.

 

I'd set up an LLC, fund it with the proceeds, and then shop around for a no-doc loan where you can put 50% down. Anybody will loan against real estate with a 50% LTV. The interest rates might be pretty good as well.

By holding the asset in an LLC, it also shields it against attempts by creditor claims.

If you know someone with good credit who's amenable to being in the business with you, you could have them become a member and then use their info on the loan app.

But AFAIK, no-doc loans are fairly blind. With 50% down, they're not terribly concerned about your ability to pay. One mortgage guy told me even a dog could get a no-doc loan on a 50% LTV!

 

I would look into a FHA loan. You will get a decent interest rate.

 

The best place to start? With people who are in the know! Who do you know who's in real estate? Or call a few Title companies and ask what kind of deals they're seeing.

Don't quote me on this, but I've heard that no-docs can go as high as 70%. With 50%, it should be fairly easy from just about anywhere, according to my sources.

I'm told the point behind a no-doc loan is they're basing their decision entirely on the value of the underlying property. Thus, it requires "no documentation" besides an appraisal or two. If you put 50% down, there's not much downside risk for them unless you're uninsured. So your credit score or history won't make much of a dent in the interest.

Just call around and see what you can find.

See if there are any local real estate investment groups in your area.

 

I would start by asking friends and coworkers (whose judgement you trust), I'm sure a good name or two will pop up. If you are planning on selling your current house, ask the real estate agent you plan to work with, they know all of them in their area. You can also just "Google" for brokers by your area, or call your local Chamber of Commerce, check the Yellow Pages (and phone interview them, if you do).

A 50% LTV is a substantial "risk reducer" for loan purposes, so yes it will be a motivator.

Another idea, with a 50% or > down payment, you may find some house sellers who would give you a personal mortgage. Don't hesitate to ask..

 

Yes, indeed, a lot of sellers who don't need their full equity out of their house, or even investors who are stuck with few options, might be willing to do a this. It's called "seller-financed" or "carry-back".

 

There are two forces working here (re: your credit report), first a mortgage lender gets nervous about any unpaid debt, as it could possibly lead to a lien placed against the property. A savvy collector would file a lien just before the mortgage lender to ensure "first in time, first in place".

Second is your credit score, paying off the debts does not mean your score will increase, or change. It requires removal to increase the score.

I would suggest shopping for another mortgage broker, and getting a second opinion. But be wary of any offers made, many are "teasers" which cost substantially more down the road.

 

The problem isn't the unpaid debts. Even if you pay them off, your scores won't improve much, if at all. The damage is done.

The problem you need to address, IMO, is to judgement-proof yourself as much as possible. There are potential vultures out there who'll happily swoop down and latch onto anything that looks like it has value. How you can continue to hold your paid-off home without any liens on it is a puzzle to me, unless it's not in your name.

You need a completely different strategy, IMO. Your present approach is "subtle shades of gray". What you need is a good "asset protection" strategy. As long as there are no liens or judgements in your name, or any looming on the horizon, you could restructure your holdings in order to better protect them from old creditors. But be careful because if a judgement or lien shows up, they could get a court to un-do everything.

What's missing from this discussion is this: what is your long-term goal in all of this? Simply to move? That's not much of a goal, and it doesn't address any of the financial issues. You need to shield your assets, or you might end up getting them taken away from you. (Ever heard of the old saying, "It's easier to ask for forgiveness than to get permission"? That's how some CAs work.)

My personal recommendation is to get the house into some kind of holding company, like an LLC taxed like a C-Corp (so the income doesn't pass right through to you personally). Sell the house and keep the proceeds within the LLC. Then rent something for a while. Let the LLC pay for it as part of your "manager compensation package". Find a couple of low-cost properties (or a duplex/triplex) to invest in where you can get a no-doc loan with 40%-50% down that you'll be able to rent out for at least 25% more than your mortgage pmts.

Build up credit in the buisness and ignore your own for a while.

That's my suggestion.

 

If they're large enough to file a lien to enforce, then they're large enough to put your assets at risk. Maybe they can't lien the house because it's in both your names, but once you have the cash, they could go after anything you've got in your own name.

Yes, business entities have their own credit ratings. However, they're not "consumers" and are not subject to consumer protection laws like FCRA and FDCPA. There's a whole different system set up for them. I had my own corp for a long time and never had a clue about this! I kept trying to get credit in my own name to use with/for the business, and nobody ever even brought it up. Sometimes people would ask if I had a "D&B" and I said No, I didn't want to pay them for it. Turns out you don't have to. It's automatic after you've got 5 commercial Trade Lines established. And getting those commercial TLs can be easy or hard, depending on some factors that it's best to know about up front. But if you mess up somewhere along the line, your creditworthiness could be toast.

I know of two outfits that will set up some pretty hefty LOCs for your business fairly quickly, but one requires you to have at least 670 scores on all your CRAs and the other requires 700s across the board. The first one can get you $50k-$100k of signature LOCs in just a few weeks. The second one can get you $100k/$200k/$500k in a few months (half of which are comemrcial TLs like gas cards and Home Depot credit) depending on your credit scores. They both charge about 5%. And it really helps to have a bona fide "place of business" along with a business phone that's listed with 411, even if it's your house. The creditors don't like "virtual offices".

I've found a goldmine of information on this subject over at creditboards.com in a forum entitled "Business Credit".

 

As I said, credit for business entities is a whole different ball game from consumer credit. However, a business entity is a lot like a child. It's not easy for someone who just turned 18 to get unsecured credit if nobody co-signs for them, just as it's not easy for a brand new LLC to get the same. Are there ways to do it? Of course! Will either one get a half-mil LOC on the first try? Highly doubtful. But they play by different rules. (If you go that way, you'd better have a CPA handy to help you out!)

With 17,000+ posts in the "Business Credit" forum at creditboards.com, you might find a few tidbits of relevant info.