| The stars have lined up against many would be | | | | credit. It will be assumed that in spite of the past |
| buyers with the amount of baggage they bring to the | | | | history, the buyer now can make a monthly mortgage |
| table in the way of challenged credit. They want to | | | | payment and may even have some cash to work |
| buy something. They need to buy something. Whether | | | | with. Cash can be gifted from parents or other |
| it be a recent bankruptcy, repossession, foreclosure, | | | | sources if necessary. The results of the mortgage |
| large medical bill collections, identity theft or judgements | | | | broker interview will dictate what and how the deal will |
| or recent unemployment any one of which can | | | | need to be structured. Pulling credit will determine if the |
| plummet a credit score and put the would be buyer in | | | | housing history is 0 x 30 (meaning no housing |
| a financial hole. In a soft real estate market where | | | | payments more than 30 days late in the last twelve |
| owners need to sell and have a high degree of | | | | months) or worse. Collections, judgements, |
| motivation to dispose of their property. This is the | | | | repossessions or any other adverse challenge the |
| opportunity that a buyer with challenged credit history | | | | buyer may face will be noted. From this exercise, a |
| can seek to "help" a seller out of their current dilemma | | | | buyer will have a payment number in hand for their |
| by arranging sale terms that will help both buyer and | | | | monthly housing expense including principal and interest, |
| seller. These scenarios may not work for anyone who | | | | taxes and insurance and perhaps a maintenance fee |
| has zero options, zero income and zero means to pay | | | | (as found in an association or condo) all inclusive in the |
| anything back. It is rather, for those who are fighting | | | | monthly housing expense. The mortgage broker and |
| their way back and do have options, have income and | | | | realtor will need to work in tandem to structure the |
| now have means to meet their obligations on a | | | | deal that is achievable on part of the buyer. Many |
| negotiated deal. This will not work if a buyer throws | | | | times, in the market place the deal is negotiated |
| their hands up and gives up to the possibility of buying | | | | without any thought to the financing. Here it will be |
| a property. This opportunity will work for those buyers | | | | necessary to fix the financing first THEN find the |
| who have a need as well as a burning desire in their | | | | house. Most buyers with a 580 score or better can |
| belly to buy something that will meet their family goals | | | | get a 95% Loan To Value first that allows a 100% |
| and will do what is necessary to make it happen. | | | | Combined Loan To Value. This will no doubt be a |
| A buyer needs to be aggressive in their efforts to | | | | subprime type loan with the first being one loan with no |
| take advantage of this temporary real estate market. | | | | Private Mortgage Insurance (PMI). An offer might look |
| Some areas of the country have more opportunities | | | | like something like this: |
| than other areas. However, there are deals in every | | | | Purchase price would be at say $225,000 with a 95% |
| area. A buyer needs to find them. There is little reward | | | | LTV first mortgage of $213,750 and allow a 5% LTV |
| for a buyer to deal with an unmotivated seller. There | | | | seller held second of $11,250. The rate on the first |
| must be pressure on the seller to move the property. | | | | would be for this scenario 8.5% on the first and |
| Whether it be for reasons of health, estate situation, | | | | aggressively negotiate the same for the seller held |
| job loss, divorce, out of state move, downsizing, | | | | second or less. A seller may rationalize that they were |
| upsizing, budget, cash flow or other reasons if a buyer | | | | going to reduce the price another $10,000 in 30 days |
| with checkered credit has a shot of doing something. | | | | anyway and this way I get most of their cash now. |
| A buyer early on will need to come to the conclusion | | | | Following then, the first mortgage of $213,750 with a |
| that the chance of matching the perfect house with | | | | rate of 8.5% with payments on a 2-year fixed ARM |
| the perfectly motivated seller will be slim. Therefore, | | | | of $1,643.55/month. The second of $11,250 at say 8% |
| from the get go the buyer must be willing to | | | | on a 10 year basis would be $135.95/month for a total |
| compromise on the purchase. The buyer must realize | | | | principal payment of the first and second of $1,779.50 |
| that this is not the last home they will buy, it is the first | | | | month plus taxes of $300/month and insurance of |
| home they will buy with a high degree of challenged | | | | $220/month for a total housing expense of $2,299.50 |
| credit. The buy decision, although well thought out, must | | | | month in housing expense. With a subprime loan, |
| recognize the purchase is not permanent and is not | | | | collections and such are not included in the debt |
| fatal. It is simply a means to get into a property and | | | | service calculation if they are old enough. So for a |
| get on the equity accumulation train, which will help | | | | working couple if the lender allows a 50% debt ratio to |
| them over time. So the search begins to find a | | | | income the minimum income on a full documented loan |
| motivated seller while being somewhat flexible while | | | | would be $2,299.50/. 50 = $4,599/month. Say the wife |
| not having unreasonable expectations that will not fly | | | | makes $3,000 per month and the husband makes |
| with the current credit circumstances. | | | | $1,599/month then they would just make it. The seller |
| Buyers can try to do it themselves or choose to bring | | | | would need to pay all the buyers closing costs and |
| in a professional realtor who knows the market. Right | | | | prepaids (tax and insurance escrows and advanced |
| now a lot of realtors have a lot of time on their hands. | | | | fees) and any buyer cash can be used for monthly |
| Six months ago when the market was raging, that | | | | lender reserve requirements. |
| was not the case. What a difference a day makes. | | | | In summary then, this is a temporary buyer's market in |
| The criteria then on a broad based approach would be | | | | most areas and to be successful buyers need to |
| to find a vacant home, on a realtor lock box, with a | | | | focus on motivated sellers. Even before looking at any |
| lower mortgage balance and with a high seller | | | | property the seller's agent must be interviewed to |
| motivational to move the property. If a property is not | | | | determine if there is a high motivation of selling the |
| listed, then the seller may not be motivated enough for | | | | property by paying all the buyers closing costs and |
| a buyer's purposes. They are not serious enough. If a | | | | prepaids and perhaps hold a 2nd mortgage. If there |
| property has had three or four price reductions in the | | | | isn't, the buyer should not be looking at that property. If |
| last few months in the Multiple Listing Service this | | | | the buyer has a vacant lot, a small mortgage note, |
| would be a sign of a motivated seller. Likewise if a | | | | income property or anything of value like a boat or |
| seller has indicated a willingness to pay for buyers | | | | motorcycle can all be brought to bear on a deal. The |
| closing costs, hold a second mortgage, consider a | | | | barter and trading process is how America was built. |
| lease option or a lease purchase, these are all signs of | | | | Working in tandem with a professional realtor and a |
| the degree of seller motivation necessary for a buyer | | | | mortgage broker a buyer can enlist some professional |
| with challenged credit to find a workable property. | | | | help to meet the needs of their family even with |
| Early on in the realtor selection process, a working | | | | challenged credit. It is not a static situation. During the |
| relationship must be established with a realtor who is | | | | first two or three years of this scenario the buyers |
| willing to make multiple offers and does not take | | | | need to put their financial house in order through family |
| rejection personally until an acceptable deal can be | | | | budgeting and planning with discipline to qualify for a |
| negotiated. | | | | better rate and terms on their mortgage and other |
| At the same time, a mortgage broker will need to be | | | | credit needs for their families future. In a few years |
| contacted to determine exactly what is possible in the | | | | through a lot of hard work and sacrifice they can be |
| way of a first mortgage. Banks are not geared to do | | | | out of their financial hole and back on an even keel. |
| what will be required to make a deal with challenged | | | | |