No Credit, Bad Credit, OK?

Every Sunday I open the newspaper and read home for sale ads like this:

NO CREDIT Needed, BAD CREDIT OK! Just xxx down and xxx dollars per month, and you own it. 3/2/2 brick, blah blah blah...

This sounds great, doesn't it? Just think, you make a small down payment, and monthly payments, and the house is yours, NO MATTER WHAT YOUR CREDIT IS!?

Hmmmm. How does THAT work? My years as a loan officer have me curious.

Yes, it seems that credit is pretty easy to get today. In fact, some lenders promise that they can get you a loan NO MATTER what your credit. Technically, that is almost correct. If you have no credit, or horrible credit, you can in most cases get a loan at high interest if you put enough money down

It seems that the seller doesn't really care if you get financing, or good financing, at all. That concerns me. Many buyers using the lease option or lease purchase plan (same thing, by the way) for some reason good to them don't end up buying the house after the initial lease term. We can live with that. But...

When I sell a house under the lease purchase plan, I WANT the buyer to get financing! I WANT the buyer to get good, affordable financing, so they are happy with the deal and refer other buyers to me. I WANT the buyer to get a good loan and quickly, so I get my profit out of the house.

Our company works very hard to get the buyer financed, because we are in a BUSINESS... a BUSINESS that needs repeat business and referrals. I don't want to keep the house and resell it again and again.

It's not in the seller's best interest to advertise for buyers who cannot get financed, in my opinion. These sellers just don't seem to be that committed to getting you through the financing process, only getting a down payment from you and having you make monthly payments to them. Is there something wrong with the house? With the price?

In all fairness, it could be that these homes are 'owner-financed' homes, and the seller has little credit requirements, but there are not really many true owner-financed homes out there. Most of the time an investor offers this option, and then sells the loan to another company for his money now. That's OK, but the purchasing lender wants to see that you are qualified in some way, or they don't want to buy the paper. Makes sense, doesn't it?

Next time you see these ads, ask yourself "How can they do that? How can the seller get me good financing this way?" Know what the game is before you play. Is everyone on your team? Do you know these easy ways to buy?

Ken Chipman