Q: I want to invest in real estate, but my credit is not good. Should I just give up on purchasing real estate?
Here are a few of my thoughts on credit, and what to do to ensure you become credit worthy in the future.
Since buying real estate has become a bit of a fad, it seems we are inundated with information about CREDIT/FICO scores/Mortgages/Refinancing. Trying to figure out what's happening and how to "get in" can really be frustrating! As a "real estate professional", I'd like to encourage everyone to take it one step at a time with an important first step being: take care of your credit.
Okay, okay, perhaps you have made poor financial decisions or your credit is horrible. So what. If you decide you want to change it, you can, it just takes a little bit of research and diligence!
SOME THINGS YOU CAN DO:
1. To start, you have to obtain your credit reports. There are three credit reporting companies and they all say different stuff! You need all of 'em and you need to make sure they have a score on each of them so you'll have an idea of what you are doing. You can do this two ways (that I know of). (a) Phone a loan officer. I'm sure you know one by now unless you live in a remote area. A loan officer can pull all three credit scores for you and won't charge you as they are looking forward to making you a client. Be sure to tell them that you need a copy of the report when they have it so that you can check for errors. By looking at the score, they can tell you if they can help you obtain a mortgage to buy your own home, and/or your investment property. I've never met a loan officer that wouldn't give me a copy of my report. (b)you can purchase all three reports with a score online at myfico.com. It will cost you about $45, however that's a small price to pay for such important information. Once you have the reports and the score, you are on your way to making moves! You will either be moving...physically when you move toward owning your own place, you will be moving your credit score FORWARD from where it now lies or you will be moving ON UP as you plot your real estate moves.
2. READ/RESEARCH. Figure out what your credit score means. Why is it important? You can obtain a loan with a credit score as low as 540-560. Your interest rate will be high but, even in the 500's, you can get a mortgage! The idea is to try to get your score above 620. You may still pay a little more in interest but, if you have a steady income, you will likely be able to buy a home with no money down. Get the score over 640 and you'll see better interest rates. The real prize is getting your score over 700. You can get whatever you want. lol. For your reading pleasure, I'd recommend Su.ze Or.man's book: Young, Fabulous & BROKE! I downloaded the audiobook and it has everything you ever wanted to know about credit and credit reports included what scores mean, how to prepare for buying real estate & how to clean up your report or raise your score. I'd also recommend the Rich Dad/Poor Dad series....
3. Look around. Talk to people. Network. Find a loan officer or banker and start asking them as many questions as you can. Don't be afraid to share your goals and ask them if they will help you get where you are trying to go! If you already own a home, figure out how you can make it work for you. Investigate equity options, talk to a lender or banker you trust.
No matter what, please be sure to get up, get out and get going!