A good credit score is essential for anyone who intends to buy a house. It is difficult and almost impossible to buy a home if your credit score is far from good. Future home buyers should note that the majority of lenders won’t grant you a loan if your credit score is not up to 620. Some lenders may only consider applicants whose credit score is above 700 while others may peg their credit score requirement at 720 or 740.
When it comes to real estate investing, there is flexibility. You can get a traditional loan even if your credit score is below the requirement. There are lots of other real estate investment options that you can consider if your credit score is sub-par. Here are some ways to invest in real estate with bad credit:
Go for a hard money loan
One of the options you can consider if you have a low credit score is to get a loan from a hard money lender. Hard money lenders are private individuals that issue out short term loan. You must be aware that the primary interest of this lender is to invest. So, they are not going to fund an individual who wants to buy a home to stay.
Consider a private lender
Another funding source to consider when you have bad credit is a private money lender. Anyone that is looking for a return on their investment can decide to give out a loan to people. Private money can come from anybody – business partner, relatives, friends, and acquaintances.
Get a partner You can decide to strike a partnership deal with someone that has a good credit score. The partnership should be mutual, and your partner could be a colleague at work, neighbor, friend, or relative.
Consider seller financing
This strategy is ideal for properties that are wholly owned and paid off. Seller financing could be an excellent option if there is no problem with cash flow and the seller does ‘quick money' from the sale of their property.The seller becomes the bank when they finance a deal. Meaning that you have a mortgage with the person selling the house. Based on your agreement, the seller permits you to pay monthly until you clear off your debt.
Look into wholesaling
Wholesaling is another excellent way of investing in real estate when your credit score is low. The steps involved in wholesaling are:
1. Finding a seller
2. Look for another buyer to stand in your place
3. The buyer assumes all the terms and condition stated in your purchase agreement
4. You earn an ‘assignment fee’ for your role
Talk to a local real estate agent to know what options you have in your real estate market to take advantage of regardless of your bad credit.