Posted by Ken Stampe on September 22, 2005 at 15:41:53:
What Pat said about HML reporting credit histories is true but there are exceptions. There are more and more lenders moving into the “hard money” arena and they will report to credit reporting agencies. If so, a new liability will reduce your credit score in the short run. Keep in mind that scores are a numeric representation of how risky you are as a borrower. Therefore, someone who just borrowed $45,000 and has only made one payment is “riskier” than someone who didn’t just take out that much debt. After you have built some equity between your original balance and the amount you owe and show an on-time payment history that tradeline could (and should) boost your credit score.
Posted by Kwinten on September 20, 2005 at 23:44:36:
I am new at investing and keep hearing people in the know say things like “be creative at raising money” “don’t just get loans from banks to purchase and investment etc”. What does this mean? What are some creative ways to secure funding for a purchase on real estate?
Don’t buy the hype…sell it.
Generally, people are referencing “seller carry backs” (i.e, seller financing) and hard money loans (I.e., non-FDIC lenders) and there is always grandma betty or uncle joe sitting on their cash (i.e, partners). Hope this helps.
Posted by Kwinten on September 21, 2005 at 13:07:31:
Thanks for the input. So, how are seller carry backs orchestrated in general? Do hard money loans hit credit scores? If so, how significant a hit?
Thanks again
A true hard money lender will neither pull credit or report. Hence your credit score will see no activity.
Some non-conforming lenders who claim to offer hard money will do a credit check and then see if they can get you into something that is less costly than hard money.
Question:
“So, how are seller carry backs orchestrated in general?”
Answer: “Hi. Joe Bob Seller. I understand you own this property free and clear. Instead of me paying you $100,000 right now how do you feel about 10% now and another $215,000 over the next 20 years?” Or “Hey. Joe Bob Seller. I know you did not like that financing over 20 Years option, cancer was it? Well how about this: I’ll still give you 10% down and you will still give me a note…but… we will structure the note so that a note buyer will give you a good price. Now you and I both know this buyer is going to discount the note so I will also pay “X” amount over what you were asking.”
Question: “Do hard money loans hit credit scores?”
No credit effect unless you default. Only hit is going to be the hard money lender pulling your credit to see what they are dealing with.