Does This Work? Please Help!!!

Question

Hi guys, due to my credit score, most banks will not entertain me. Long story short, I'm able to buy the ABC property without any mortgage with my personal savings to start but of course it'd be wise to use bank's money instead of your own to buy property for investment.
          
          THE PLAN: If I buy ABC property (without any mortgage) for personal use with my personal savings, which means I fully owned ABC property with full equilty. Can I use ABC property as a mortgage to get a 80% bank loan for my 2nd property for investing? (assuming both property are of the same league)
          
          The reason why I'm doing this is because if I do not have ABC property under my belt, bank would require me to put that money with the bank as a security. Rather than putting it in the bank with measly interest income plus the inflation, the best bet here would be; instead of putting the money with the bank as a security, I might as well put the money in ABC property whereby I can either use it for personal use or rent it out as well as beating inflation and lastly there is still a chance it may appreciate in value. 
          
          In short, ABC property is just to show the bank that I owned a property here and I wanna use it to get a loan to start my investing business in real estates.

Jim Wineinger · Answer

I guess that is right Eddie. Looks like I was thinking of Hongkong.

But I believe the point remains the same.

Jim Wineinger · Answer

The other question that might be of interest to discuss in Winstrol's position is to notice that he divides his time between Thiland, Bangkok, and CA.

This would bring up additional risk to the banks. If he were to default, where do they get hold of him to serve him his notice.
 
I am not sure how a low wage earner could easily move between these three places, but anyone want to also mention the problems associated with a possible foreigner trying to get credit and improve that credit within the US intself?

Lets try to keep away from the political side of things with illegal aliens and what some banks are doing, but speak those who are properly trying to do things and may not understand just what to do to help their situation.

Cliff Hudson · Answer

I pay all my bills on time. Be it telecom, water, electrical bills, etc... Does that mean I've to show the banks all these bills?

Jon Holdman · Answer

Mike's referring to your credit score, not your utility bills.  If you have a crummy credit score, it means you have not paid your debts in the past, and that's why banks won't lend to you now.

Eddie Ziv · Answer

More then the credit score, it is your DTI ratio. Your credit score (Unless it is horrible) will mostly determine your interest rate. However, you DTI (Debt to income) ratio will determine your ability to pay that loan. The bank will look at your total debts and your income for the past two to three years, your job security, and evaluate your worthiness. In any case, I doubt if they let you have a cash out loan of 80% LTV. I think 65% is more like it.

Jim Wineinger · Answer

This will be especially true, since you, judging by your cities listed, are out of the country most of the time and may not be a citizen.

They will be even more critical of your low credit score. The score is very important because it identifies the amount of risk that they are taking in making the loan. If you want a loan you will need to improve the risk that the bank see, which is your credit score.

This will be your first step in the journey.
I would suggest that you read up on what makes up a credit score so you will understand how to improve it. This information will come in handy to you when you evaluate others that you would rent your investment property too.

The greater the risk is that you will not get your rent, the higher the security deposit you should ask for.

This is the same principle the banks use. The greater the risk thay you will not repay a loan the higher the interest will be if you can qualify for a loan.

This is why you want to raise your credit score and thereby lower the risk to the bank. It will save you a whole lot of money in the end.

Cliff Hudson · Answer

Will be very grateful if anyone out there can guide me to buy my first investment property...

James Harkness · Answer

Banks are still going to look at your credit score.  Banks are not in the business to foreclose on properties and then have to sell them as REOs.

Your credit score will be a determining factor in your abilty to get a cash out refinance.

You will likely need to get a hard money loan, where they don't look at your credit score as much and instead focus on the value of the collateral when doing a loan.