Ed, Ken or Ben will this work??? help please!!! - Posted by Big E

Posted by Big J on May 27, 2008 at 11:31:57:

This sounds almost identical to my deal. Yes you can put up a cd for collateral on a loan, or you can buy the house outright. What I plan on doing and its basically what Ed is saying here, is to just find a lender after the repairs are done and the place is rented out, then you get your CD money back and can use it to start seeking another deal. I was desperate to build my credit using this method, but I doubt its going to do anything but cost me some money in the long run as the lender who required it probably won’t be any more flexible in the future.

Ed, Ken or Ben will this work??? help please!!! - Posted by Big E

Posted by Big E on May 26, 2008 at 21:34:38:

I am purchasing a house in a small town in TX. No hml will help me, becaue of the population of the town. I am purchasing a house for $18,000 and the house will appraise at $65,000. I only have to replace the carpet and add a refirg. The house was updated about 2 yrs ago. and the owner died and the daughter is selling and going back home.
I have the money to pay cash for the house, but I was wanting to know if this will work.

I have bad credit, and I don’t mind paying for the house, in cash. But is it possible to go to the small town bank and get a cd, and then borrow against it.(the president of the bank knows me and my grandfather. yes I will have to pay the monthly payment, but this is rebuilding my credit. Once I pay for the house, I would like to go to the other small town bank or credit union, and try to borrow against the house using it as colleteral. I only want to borrow to pay off the charges on my credit. it is around $13,000. I have been talking with the credit companies and making deals, to remove items once they are paid. I can handle the payments on both house and loan. the house will be rented for $675.00 so that helps me keep my money.

please help me

Big E

BIG E fo Easy street - Posted by Kenneth Hocking

Posted by Kenneth Hocking on May 30, 2008 at 06:05:08:

Let’s take this REAL deep

You have managed to save 18,000 without taking Care of the 13,000 in previous debts. Looks like you got the pay yourself first down well. but your credit has suffered

As Far as your credit cleaning runs… the age and size of the balances that make up your 13,000 makes a difference on whether your credit should be CLEANED up or whether you Should negotiate to pay down the debts or just ride them out until they fall off. the tipping point will be determined by the type of debt and its age.

Ed is correct in that Creditinfocenter.com and my favorite creditboards.com is a wealth of Info.

But here is my take and really depends on some Great assumptions made by me

With a home worth 65K and a purchase price of 18K and 13K in debt balances if you went to the bank and put all of your arsenal on the table it could play out like this

Mr. Bank President I would like to Finance a Home I own at 50% LTV which is 32500 and I would like to put up a 6K CD pledged against this Loan as well so the bank will be in just over 40% LTV on the Home in their town/area. My plan is to take the 32,500 and use 13,000 to clear up all my outstanding debts ( we can even have the title company pay these debts directly if you wish mr Banker), give 6K to you in the form of a CD pledged against this Home meaning you lose it if you do not pay for the house

Since I and you “mr Bank President” know this area has limited rentals I plan to rent this home out at $675.

SO what I need is a 50% ltv loan with a 6K Pledged cd and a 10 Year Am at 8% ( prime plus 3) but ask it to be fixed at least for 3 years if not 5. with the ability to renew it later for a 10% buydown and

What you need to know is you Insurance and taxes. I am going to assume the Taxes are 100 a month and Ins is 50 a month this would bring the PITI for 32500 at 8% for 10 years to 394 PI +150 TI =544 PITI

At the end of this if it works you will own the house, have paid off your 13K in Balances, Have a 6K cd and about 13500 minus closing costs in your warchest to go look for another deal and about 130 a month in cashflow.

The 10 year am at Hogher interest with the pledged CD and the LOW LTV and a business Plan that shows the bank you are serious about your future is you best shot.

Lastly for added measure but only if needed you may have your grandfather co-sign with you.

If they delay/deny you may want to use the same idea at the CITI and Beneficials that Ed said use.

It may also be possible to talk the duaghter into taking 6K down and Payments and then you can use you funds to pay off the bad debt and then in 6 months after beng on title you can go to the bank to refi.

At the local bank the short term and pledged CDs are key!


Re: Ed, Ken or Ben will this work? help please! - Posted by Ed Garcia

Posted by Ed Garcia on May 27, 2008 at 08:52:31:

Big E,

There are many ways to skin this cat.

I donâ??t have enough information about you, meaning, how long have you been on your job, just how bad is your credit, what are your future investing plans, etc?

Since youâ??re in a position to pay cash for the house get it done. Iâ??m assuming youâ??re your intention is to keep the house as a rental and not flip it or I would be advising differently.

When youâ??re finished with the cosmetic fix-up put a tenant in it per your post for $675.Next I would go to Beneficial, HFC, American General or Citi Finance to name a few and get a loan on it for $20,000. My payments for 15 years at 12% would be $240. Now remember Big E, Iâ??m only doing this to help rebuild my credit and I might even get a better rate then I gave you but Iâ??m being conservative in this post.

Then Iâ??d put the $20,000 in the bank. Here is my result. I now have a loan for $20,000 on a house valued at $65,000 leaving me a LTV of 31% with a positive cash-flow of $410.

With owning assets of real-property at 31%, positive cash-flow of $410 and $20,000 liquidity in the bank it leaves me in better shape to do my next deal. If you borrow against you own money as youâ??ve suggested, youâ??ll still be building your credit, but youâ??ll have no liquidity because youâ??ve pledged your cash.

Remember Big E, this move is only a stepping stone. While youâ??re doing this go to creditinfocenter .com and learn how to repair your credit, you can do it for FREE.

Food for thought,

Ed Garcia