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Updated over 3 years ago,
How to get good loan terms with thin credit history
I graduated college last year and was thinking of buying a rental property (duplex) in my college town that was for sale. I'm able to put down 20% since house prices are much lower in that area, and I calculated ROI to be around 11% once the current tenant leaves and I'm able to get market rent. (9% with the current tenant)
"Ok", I thought, "let's find out some actual financial numbers".
I went through a loan company to get preapproved, and since my credit history is thin (I followed Dave Ramsey way too closely and didn't get a credit card until my senior year of college) my monthly payment is almost double what I was expecting. Along with closing costs of (my rep's words not mine) $6000-7000 on a $100,000 property, it's looking like I will need to either wait to build my credit and savings or just find a cheaper property. I calculated ROI as 5.5%, which keeps me afloat on the loan, but I'd rather just invest in stocks at that point.
So my big question is, should I shop around for better terms? Or will I just waste my time and just wait to build up some extra savings and credit? Has anyone been able to receive good financing with no credit? I thought about going through my credit union, but I know that an application will hurt my already almost non-existent credit score.
I'm fairly new to BP, so please feel free to rip into me in the comments.
Also, for reference, I work full time W2, and am able to put back around 40% of my paycheck each month into savings after retirement/taxes etc.
Thanks,
CJ