what can i do

Question

Members looking for some help. I own my house free and clear want to use it to buy rentals and flips. I cant get banks to lend on it. A little background i lost my job in 2009 and have 3 derogatory marks on credit because of it. Credit is perfect since then but only have score around 640s. my income is about 60k and have worked for same co for 5 years. i do have student loan 2 cars and some credit cards on history now. Cards are at 75%usage. i am meeting with banker any suggestions will be welcomed   Thank u

Char Prado · Answer

@Taz McDole

Money and Credit is a crutch! You need to read up on "Creative  Financing". Join your local REIA club, go to "meetup.com" and look up  your area. Creative financing is lease options, seller financing-  they're the bank, partnerships, Joint Ventures.

If you can do deals without putting your own credit/money at risk then in harder times you will also be successful.

If you depend on credit/cash then when the hard times come and you don't have either, you're out of options...

Click on the LEARN tab above and check out the "Podcasts", you will most likely learn everything you want to know.

Family and friends can also be a great resource.

Good luck!

Mark Elliott · Answer

ok, here is what you do, taz. first, go on to annualcreditreport.com. you are entitled to a free credit report from all 3 credit reporting agencies one time a year. this site will allow you to look at all 3 credit reports and dispute anything on them. that is the key. anything negative on any of the reports... dispute it. reason being is that the credit reporting agency is, by law, required to contact the creditor and verify anything you dispute. 50% of these disputes will not be answered back to the credit agency and then, by law, if the creditor does not answer back within 30 days, the credit reporting agency is required to remove it from your record. thats right. even if it is correct, if the creditor does not answer back, the credit reporting agency has to remove it from your record as though it never existed.

you may find things on your credit report that are inaccurate as well, and you need to remove them in the same way. anything negative on your report is hurting your credit score, so you need to get it removed if you can. also, the credit cards at 75% usage is a big hurt as well. anything over 50% usage is a problem. creditors like to see you using your credit cards, yes, but only to the level of maybe 30 to 40%. call those credit card companies and ask for a credit increase. thats right, it sounds stupid, but if you increase your avaliable limit without adding to the balance, you lower your usage factor, which will increase your credit score. one last thing, if there are any " hard inquiries on your credit report, dispute them as well. hard inquiries hurt your credit scores too. when you have gotten your credit score up to a decent level, contact some banks and look for an equity loan. if you knock on enough doors, you will find a bank willing to loan you the money.

Cheryl Packham · Answer

The thing that concerns me about your post the most is that you do not pay a mortgage payment yet you have 75% credit utilization on your credit cards.  This means you spend more than you make and that right there is a problem.  You make a substantial income so you should be able to do some work and get in a better place in a few simple steps.  I have done this very same plan, so if you have any questions please let me know.

Step 1: cut up and stop using your credit cards.

Step 2:  Save up an emergency fund of at a minimum of $1000.  Do whatever you need to even if you have to sell things or whatever, but try to do this in 3 days if possible.

Step 3:  Cut out any non-necessary expenses by creating a budget.  Determine what your fixed expenses are and make sure you include your annual expenses as well.  Then determine what your monthly variable expenses are.  Once you know your required expenses that are necessary for the near term then you can evaluate your non essential expenditures.  Do you buy coffee or go out to eat?  Do you make purchases that you haven't planned a head of time.  Do you have monthly subscriptions on things you don't need or use?  Could you re-evaluate your cell phone plan, internet, television and lower the expenses or shut off temporarily?  Could you rent your house and move to an apartment or with family?  Do you have an extra room that you could rent?  Find a away to understand what you spend your money on and how to free up some extra cash so that you can use it for the next step.

Step 4:  By this time you should have freed up some funds that you can now start applying to your debt.  I recommend starting with our highest interest rate debt but you could also work on paying off the lowest balance first.  Take whatever money you have freed up in the previous step and put it towards paying down ONE of your debts.  Don't spread it across several because you want to get one paid off as quickly as possible.

Step 5:  Once you get one dept paid off roll that payment and the extra you were putting into it into your next debt.  Keep doing this until your at a bare minimum your credit cards, are paid off.  But preferably your cars and student loans are as well.  Once you hit this point your credit score will increase.  Do not close your credit cards after you have them paid off. . . trust me this was a mistake I made but do not use them for personal expenditures unless you have the self control to pay them off every month.

Step 6:  Save up at least 10-15K for emergencies and other large purchases you  make  throughout the year to ensure that you do not need to use a credit card if something comes up.  Any time you use the money out of this fund, make sure you have a plan to pay it back quickly.

Step 7:  Now you have the credit score back, some reserve in the bank and your DTI ratio is in better shape, banks will probably be very likely to give you a cash out refinance on your primary residence to use for investments.

Step 8:  Go forth and do good things in the world!

Mark Nolan · Answer

@Taz McDole

BP is full of useful resources such as forums and blogs. Welcome to the Bigger Pockets community-be sure to check out all the awesome BP blogs under “Learn.”

William Johnson · Answer

It really depends on your personality. There are successful investors who are pros at using other peoples and there are others who only do as many deals as their own individual cash reserves and credit will allow. You can be successful either way but it is up to you which one suits your individual personality. Do you like huge challenges and regularly being out of your comfort zone or do you prefer relative comfort?

I suggest figuring that out and then proceeding one way or the other. A lot of new investors don't ever ask themselves these questions and as a result never get going on anything.

Richard Redding · Answer

I'm not sure you're at a stage where I would recommend investment.

Forget credit for a moment, but you should focus on paying off debt, starting with the credit cards. You'll feel less anxiety, and feel better about yourself, and ultimately be able to make better decisions. Dave Ramsey's Financial Peace University might be a good class for you to take.

Also, don't dispute legitimate credit issues, as suggested by another poster. Ethics are more important than money.

I'd also suggest selling your cars and getting a beater to free up some cash.

But if you absolutely are determined to get into real estate investment, sell your house and buy a duplex in cash. Live in one side and rent out the other. If you can't buy an entire duplex in cash, look for one owned outright and ask if they will owner-finance it to you. You'll surely have enough for a very enticing down-payment.

Good luck!

Deshawn Lewis · Answer

i think you should shop around at other smaller banks or lenders. someone should approve you. your situation isn't that bad(from what u stated)..

good luck

what can i do

Most Popular Reply