Buying Real Estate When Your Credit Is Whacked!

After the economic abundance that our country enjoyed prior to 2006, we have come to an unfortunate place where many people have been displaced from their homes due to foreclosure.  Similarly, many homeowners can no longer afford their homes due to employment changes but their credit has already been destroyed and they see no options.  They pray for modifications and short sales options which have not been too forthcoming leaving desperate homeowners underwater and feeling helpless.

The banks are out of control.  They have committed numerous frauds and our legislators have not adequately punished them because we are told, "they are too big to fail".  So they continue to receive bailouts and monetary "punishments" which is  ultimately chanelled back to benefit the banks.  This is all done against the majority's wishes and there seems to be not a darn thing we can do about it. The banks can falsify documents, charge exorbitant fees without disclosing them and the average family is suffering terribly from their unfettered greed.

There was a time when money from the banks was so cheap and easy that buyers had no need for owner financing and real estate was selling so quickly that few sellers offered it.  Then everything changed!  Home sellers are now competing with bank foreclosures to sell their homes and a large number of buyers are cash investors looking for "deals".  Even though sales are up, it's important to know who's buying and who's selling.  Let me share some statistics from the Tampa Bay area for real estate sales in March 2013:


Short Sales seem to be picking up - 15% of all sales.

REO's (bank owned foreclosures) accounted for 18% of sales

Non foreclosure sales were 67% of all sales


So 33% of all sellers are either banks or homeowners who are upside on their mortgage. Upside down on a mortgage means that the homeowner owes more than the home is worth. There are also many homeowners who are distressed but are not upside down on their mortgage. These homeowners may still have some equity left but their financial situation has changed and they can no longer afford their homes. So they are hoping to use that equity for a down payment on a smaller home and they can't afford to sell too low. Many of these struggling homeowners have managed to keep their home but have been late on their mortgage and other payments so their credit is shot. Again for the month of March 2013:


50% are buyers are paying cash with no financing

Almost 75% of bank owned properties (REO's) are being bought cash

So this tells us that close to half of all buyers are investors and these cash buyers are buying bank owned foreclosed homes. Lending has not gotten easier for prospective buyers and distressed sellers find that they must become delinquent before the bank will even consider doing a short sale. The question then came to mind, how can sellers save their credit and how can buyers purchase a home when their credit is shot? Believe it or not, there is a way, actually 2 ways.

1) Owner Financing - OK so most sellers say "no way". I need my money now! Did you ever consider how the banks got so rich? Lending money. When an owner offers financing, they call the shots. Generally, they should require some sort of down payment and then they charge interest on the balance which often can double or triple what they make on the sale of that home depending on how long they are willing to hold the note. They can offer balloon payments, say after 3 or 5 years or they may choose to offer a fully amortized loan for 15-30 years.

So how does this help the seller? Well, they can generally get a higher selling price for their home plus additional interest, yielding a significantly higher yield from the sale. They can save their credit because someone else is paying their mortgage payment.

2) Non-qualifying Assumable Mortgages - Yes, there still are some out there. Assumable loans have not been offered for a very long time but they are still out there from people who purchased many years ago and have not yet paid them off. The aging population and economy in Florida has caused many to downsize and some of these people who have had mortgages for over 20 years may be selling a home with an assumable mortgage. There are 2 types of assumable mortgages: Qualifying and Non-Qualifying. They are just what they say. A qualifying assumable mortgage means you have to apply, have credit etc to qualify. Non-qualifying assumable mortgages are the gold. These loans can be assumed by a buyer without credit checks or income qualification and is quite a find for the buyer who has suffered economic hardship.

The next question one might have is "do these options really exist?"  Below are the listings available (separated by county and property type) at the date of this blog post that are offering owner financing or non-qualifying assumable loans.  At this time there are 192 listings (122 homes and 70 condos) offering alternative financing in the greater Tampa Bay Area.

Pinellas County:

Single Family Homes with owner financing or non-qualifying assumable mortgages
Condos with owner financing or non-qualifying assumable mortgage

Pasco County:

Single Family Homes with owner financing or non-qualifying assumable mortgages
Condos with owner financing or non-qualifying assumable  mortgage

Hillsborough County


Single Family Homes with owner financing or non-qualifying assumable mortgages
Condos with owner financing or non-qualifying assumable  mortgage

Remember there are still ways to secure your future by purchasing a home, even when you have suffered a foreclosure or mortgage delinquency.  Seller Financing can be a win-win situation that buyers and sellers should investigate.