#how to buy a house with bad credit
How to Buy a House Without Using a Bank
As you probably already know, it can be almost impossible to obtain a bank mortgage with bad credit. If you otherwise can’t get a loan because you have a troubled credit history, one alternative to a traditional bank mortgage is to obtain one from the seller. Seller financing has its benefits, as well as its risks. You also need to know how to find the right seller to meet your needs.
Why sellers might consider financing a mortgage
These days, real estate prices have dropped yet property owners are still having a hard time selling homes. That means more owners are desperate to sell. As a result, more sellers may entertain using this unconventional approach.
Interest rates are also low. This can make seller financing more attractive to property owners, especially those who aren’t reinvesting in more real estate but are looking for income-producing investments. Banks offer investors less than 2% interest. If you come along and offer 4%, that could be engaging for the right seller.
The benefits of seller financing
First, if you have some financial challenges in your history and need to build your credit score. conventional lenders may not be willing to give you a loan. If that’s the case, this may be the only alternative you have to take advantage of the current low real estate prices.
Second, when you get a loan directly from your seller, you save all kinds of fees. These purchases are typically made directly. That means you save on real estate commissions on top of all the loan fees and points you keep. Compared to a conventional purchase, you could be saving tens of thousands of dollars when you consider all the commissions, points and fees.
On top of that, you could possibly arrange a much lower interest rate. For example, if you have impaired credit, you might get a loan from a bank but it might be very expensive. On the other hand, a seller might be persuaded to view your credit history differently and extend a lower rate as a result.