Do you want to buy a rental property? Are you having trouble getting approved for a mortgage because of your bad credit? Unfortunately, credit difficulties can happen to many people for a variety of reasons. And while you may be working hard to improve your credit score, you may have serious difficulty getting approved for any kind of mortgage in the meantime. The good news is that you have alternatives routes to buy your first income property. Here are three common financing methods for buying an income property even with bad credit:
Get an investor. While you may want to buy a property completely on your own, it may be that your best option is to partner up with someone else. Find a friend, family member, or other party who wants to get into real estate investing, but doesn't want to do much of the hands-on work. Offer to partner with them in such a way that you handle all of the requirements with the property while they handle the financing. You'll be the landlord, find renters, and supervise improvements. They'll apply for the loan and use their good credit to get the financing.
Of course, you'll want any partnership to be clearly spelled out in legal documents. However, you can then use the income from the property to work on rebuilding your credit score. Then you can buy your next property on your own.
Get a cosigner. Maybe you have a friend or family member who is supportive and enthusiastic about your income property idea. If so, ask them to be a cosigner on your mortgage. Having a cosigner with excellent credit can greatly improve your odds of getting approved. Of course, any missed mortgage payments will greatly impact your cosigner's credit, so make sure you stay current. When your credit improves, you may even want to refinance so they're no longer on the loan.
Use a hard money lender. A hard money lender is a special kind of financing partner who will finance almost any kind of mortgage as long as you have a significant down payment. You'll likely have to put more money down with a hard money lender than you would through a traditional mortgage. However, the lender will likely have a lower credit score standard, if they have one at all. Also, they may have shorter repayment periods so once you improve your credit, you may want to consider refinancing.
For more information, contact a hard money lender in your area. They can help you find ways to finance your income property purchase.