If you’re looking to buy a house but you have a bad credit chances are you’re going to get denied on that housing loan. A lot of us are frustrated with this because you don’t usually know your credit score and so you have no idea that you’ve already had a bad credit until the last moment.
And so here’s the #1 way to get yourself the house of your dreams even if you have a bad credit and that is creative financing.
Creative financing is a non-traditional or uncommon means of buying land or property.
There are multiple types of creative financing. Here are the types so you can choose whichever is preferable for you.
Hard money loans
Hard money loans are high-interest mortgages available from private investors. Desperate borrowers with poor credit scores, bankruptcies, no verifiable income, or too much debt often take out hard money loans when they are unable to qualify for traditional mortgages. Hard money becomes a last resort when borrowers cannot meet the lending standards set by banks or government sponsored enterprises.
Private mortgages
A private mortgage is a loan secured by real estate that is made by a private lender, instead of a traditional lender, financial institution, or government institution. These loans are most commonly short term and last anywhere from 6 months to three years. These are asset based loans made for the purchase and rehabilitation of real estate. Because the loans are asset based, the decision to loan is based on the criteria of the property and not usually the qualifications, or credit of the borrower.
Short sale
A short sale is when a mortgage lender agrees to accept a mortgage payoff amount less than what is owed in order to facilitate a sale of the property by a financially distressed owner. The lender forgives the remaining balance of the loan. The term "short sale" is a misnomer because it has nothing to do with shorting anything in the financial sense. These transactions can also take a significant amount of time so it is not called a "short sale" for that reason either. However, the process is shorter than the traditional process of going through foreclosure and sale by auction, which is still likely to take much longer.
To summarize everything if you have bad credit, it's difficult to get approved for a housing loan. However, creative financing is a non-traditional means of buying property that can help. There are different types of creative financing, including hard money loans, private mortgages, and short sales. Hard money loans are high-interest mortgages from private investors and are a last resort for those unable to qualify for traditional mortgages. Private mortgages are short-term loans made by private lenders and are asset-based. Short sales occur when a mortgage lender agrees to accept a payoff amount less than what is owed in order to facilitate a sale by a financially distressed owner.
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