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March 2018

Bad Credit Home Financing: The Bad Credit Blues

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So, you’re at a company happy hour listening to your co-workers talk about their new home purchases. Becky just closed on a four-bedroom steal close to downtown and is looking for remodeling contractors. William finally finished a complicated deal where he traded a rental property and another investment property for equity in a new home. Stephanie has perfect credit and her husband works at Goldman so she’s complaining that she can no longer get a mortgage rate below four percent.

And you’re still in your cramped old apartment on 10 1/2 Ave S. in St. Cloud. You have student loans, a couple of late credit card payments, a few parking tickets that have gone to collection, a delinquent hospital bill from when you drunkenly fell on the sidewalk, and you’re just thinking, “WTF, am I ever going to be like everyone else? I’ll be renting forever.”

You’re thinking that bad credit home financing is impossible.

Bad Credit Home Financing

There’s Always a Way

Lots of famous people have said, “don’t give up,” and while we’re sure you don’t want to see their names listed here, the basic premise is true. If you have MN bad credit, if you have been turned down for a mortgage, if the only credit card offers you get are from an Indian Reservation in South Dakota, and if the only auto dealer that will talk to will happily sell you a used car — but at 29 percent interest — YOU CAN STILL OWN A HOME!

Home Financing Credit Issues

Alternative Financing

 Creative people find creative ways to get a home purchase accomplished, and here are some ways to try:

  • Get a co-signer
  • Fix your credit
  • Have someone else buy it for you
  • Win the lottery (yeah, sure…)
  • Investigate rent-to- own
  • Engineer a contract for deed sale

Bad Credit Home Financing … Yeah, Right 

OK, so one through four above are long shots like Colin Kaepernick getting picked up by New England next year, but the last two methods can work. Wikipedia defines rent-to-own this way:

Rent to Own Bad Credit Home Financing

“Rent 2 Own also known as rental-purchase, is a type of legally documented transaction under which tangible property, such as furniture, consumer electronics, motor vehicles, home appliances and real property, is leased in exchange for a weekly or monthly payment, with the option to purchase at some point during the agreement.”

That’s all well and good, but there are some issues here. Miss a payment and you’re gone. You’re not really gaining equity—just some down-payment dollars. There are lots of scams that have been traditionally associated with rent-to-own.

The Better Choice

To be honest we really like contract-for-deed. In Minnesota, it’s a very popular home financing method. It’s regulated, it’s not uncharted territory, and many, many people have found their way to home ownership through contract for deed MN. There is a great place to find out valuable info regarding this often-used financing method, and that is C4D. We are reputable, know what they are doing, and have a really informative website. Whether you work with us or not, realize that there are ways to get a home — just be diligent, creative, and do some research.

The American Dream: Immigrant Homeownership

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The housing market needs immigrants, and the gap between native-born and immigrant homeowners has been shrinking for several years. But housing for immigrants is a tough subject to navigate. And the biggest question is … is it possible for more immigrants to become homeowners in 2018?

There are many ways to enter the U.S. legally. For example, student visas are relatively easy to get if you are enrolled in a US educational institution. Since foreign tuition rates may be higher, many universities recruit foreign students and will actually help them receive visas.

If you are a non- US citizen starting a business and you plan to invest money in it and therefore create American jobs, there are visas available. You can get a visitor’s visa–for vacation purposes–or you can apply for an immigrant visa. You may be able to get a green card that allows you to work in the US. If you do remain in this country after your visa has expired, however, you become undocumented, and that can lead to difficulties.

I’m Staying Here Anyway

Whether you have a green card, a student visa, a business or professional visa, or whether you may be here illegally, you may decide that you want to buy a house. Maybe you’re tired of renting, are pretty sure that you are not going to have legal trouble if you stay, and like most Americans, you want to build future equity. You may have read that even financially secure US citizens may have trouble getting mortgages. If that’s the case, should you as a non-US citizen even consider buying a house, and furthermore, can you even do it?

Yes! It Can Be Done

President Trump’s failed university offered this advice to its students in a 2010 blog brought to us by The Weekly Standard.

“First of all, you do not have to have a social security number to buy or sell a home in the U.S. Some mortgage lenders require one; however, there is not a law requiring one. You do need to have some form of government issued identification, even if it is from another country (such as a passport or driver’s license).

Those without a social security number will need an ITIN (individual taxpayer identification number) number which is issued by the IRS to foreign nationals for paying taxes on money they earn in the U.S. (The author) noted that while it is difficult for illegal immigrants to get mortgage loans, several banks have programs designed for those immigrants. ‘Lastly, it is not illegal to own real estate in the U.S. even if one is in the country illegally,’ she wrote. ‘If getting a mortgage is not an option, one can always pay cash.’”

Housing for Immigrants

Problems That Can Arise If You Don’t Have the Cash

While a cash purchase may be completely legal, obtaining a mortgage–if you don’t have the cash–can be difficult for the following reasons:

  • Hard to prove foreign income.
  • Banks may not believe your foreign accountant.
  • Lenders may fear that you will be deported.
  • Thin credit or no credit history.
  • Bad credit MN.
  • No ITIN or SSN.
  • Low credit score.
  • Other legal issues.
  • Massive student loan debt.

Immigrant Housing No Cash

Housing for Immigrants: What Now?

So, you’re here, you’ve found a great home, you have a job, you can afford a modest mortgage payment but you just can’t convince a lender to take that risk and allow you to become a homeowner. Now is the time to think non-traditional financing. With a contract for deed, you can pay for your home on installments, and after you have completed all of your payments, you will own the property. These transactions can be accomplished by two willing parties without concern of bank denial. There are even reputable Minnesota lenders like C4D that can help you do this.

Rent-To-Own

Contract for deed’s cousin, rent-to-own might also be a viable option. NOLO says, “A rent-to-own agreement is made up of two agreements: a standard lease agreement, and an option to purchase; these may be incorporated in one document or two separate documents.” In this scenario, a portion of your rent goes toward a down-payment that you can use to obtain future financing.

Rent To Own for Immigrants

Exotic and Risky?

Don’t let a conservative banker derail your plans for home ownership. Of course, alternative home financing plans can be costlier and have some inherent risks. Didn’t you take a risk, however, when you came to the US in the first place?

Just Do It

As we have shown, they are ways to purchase a home even if you’re not a US citizen. Make sure you understand all of the options available to you and start with a bank or mortgage broker, and if that doesn’t work, consider MN contract for deed or rent to own, even if you have bad credit or immigration issues.

For more immigrant housing resources, view the links below:

Should I Buy A House?

Are You (Actually) Ready To Buy A House?

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Should I buy a house? This is the question that almost every 20- or 30-year-old must answer at some point in time. But are you getting terrible advice from parents and friends? Or do they actually know what they’re talking about? But is buying what’s best for you individually? There are so many questions to answer.

And to add to the endless questions, your parents did it, your friends and co-workers are doing it, everyone says it’s the American dream, but buying a home is a major obligation, and while there are great reasons for joining the club, there are equally important reasons for waiting.

Let’s first look at the top five reasons you should NOT buy your first home just yet:

Should I Buy A House?

Why You Should NOT Buy

  1. Everyone is telling you to do it

Just because you just got married, graduated from college, got a great job or turned 30 doesn’t mean that you automatically need to buy a home. Individual circumstances are always different, and don’t take the home ownership path just because someone else tells you it’s time to do it.

  1. You got a new job and must move

It can be stressful to suddenly find out that you have to move because of employment changes. Still, that’s not a good reason to think you have to immediately re-create your present living circumstances by buying a house. Those that quickly buy houses in an unfamiliar city sometimes find out that if they would have waited, they would have chosen a different neighborhood. Furthermore, if you think you may be transferred again within the next five years, renting may be a better option.

  1. You got pre-qualified for a mortgage

Don’t borrow money just because you can. If you qualify for a mortgage today and are financially prudent, you will probably qualify in the future without much difficulty. While mortgage qualification is paramount, it should never be the only reason to purchase a home.

  1. You are loaded with debt

 Millennial Debt

*Check out how many Millennials are NOT buying homes because of debt!

If you are just getting by and carry large credit card balances, high-payment car loans and a lot of student loan debt, you may want to make sure that you can afford a mortgage payment + taxes + insurance + maintenance + furnishings. If you can’t, then wait until you can.

  1. You found a fixer-upper!

Too much HGTV may be bad for your financial health. While it’s fun to watch the Property Brothers fight through yet another renovation, reality TV sometimes skips a lot of steps and if find out you need a supporting beam and don’t have $10,000 to pay for the work, you might have been better off renting.

OK, so that takes care of the reasons not to but a home; now look at these reasons to jump into home ownership:

Why You Should Buy

Buying A Home

  1. You are finally ready

If you have saved a downpayment, your overall debt situation is good, you don’t like giving the landlord money every month with no return for you, and you really like cutting the grass, you might be ready to buy a home.

  1. You want to build equity

Go to bankrate.com and calculate an amortization schedule. Even though your equity may be slow to build, a portion of every mortgage payment will go toward your principal balance. A 30 year mortgage means just that—after 30 years you will own your home and your mortgage will be gone.

  1. You’re in control at work

You know when you have job security and also when things may be tenuous. If the future looks great, you have one less thing to worry about, and it may be the right time to become a homeowner.

  1. Mortgage interest deduction

Even though the latest tax bill dinged the mortgage interest deduction for the rich and famous, you can still benefit if you itemize deductions. Remember however, that the standard deduction has been significantly increased, so talk to your accountant about this one. Ask about property tax deductions also.

  1. We fear change

Home ownership takes a big “what if” out of the picture. As long as you make your payments, you can stay in your home. If you rent, you could be facing a different situation at lease-end, or if, for example, your apartment building is sold. Homeownership brings needed stability as it’s great knowing that you are in control.

But Wait — You Have Options!

Remember, bank mortgages aren’t the only way to finance homes. There are rent-to-own plans and better yet, MN contract for deed situations available. Alternative and non-traditional financing are two great paths to homeownership, so if you do have bad credit, large student loan balances, judgments, levies or just general bad credit, find a company like C4D that can help you.

Real Estate Blogs

19 Amazing Real Estate Blogs To Follow In 2018

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The real estate industry has changed a lot over the last decade. New technologies have impacted the industry in a huge way. It’s hugely important to keep up with new technology, consumer psychology and other innovations that change the way real estate agents do the job. A great way to stay in tune with the industry is to consistently read the top real estate blogs of 2018.

Whether your customer base is primarily young professionals, millennials, baby boomers or even retirees, it’s critically important for you to be aware of what’s happening in your ever-changing market. These sites can help you stay informed and communicate more efficiently with your clients:

National Blogs

Inman

Inman is a techy blog that also has some great stories about Realtors’ experiences in the field. In addition, it has a great pop-up that links to valuable 2018 market predictions.

Bigger Pockets

This site is more entrepreneurial and features articles about real estate investment like, “10 Lethal Mistakes to Avoid on Your First Real Estate Investment.” If you have clients that are considering flipping properties, Bigger Pockets a nice place to send them.

Redfin

Redfin is a traditional web real estate portal like Trulia, but unlike others, Redfin also makes money as a real estate brokerage. Even though you might consider them a competitor, it’s certainly valuable to see what they are doing. This site is like the CNN of standard big real estate sites, and is full of varied information.

Realtor.com

While Redfin’s site may look like CNN, the one is similar to MSN, with generic and wide-ranging articles like “Pending-Home Sales Tumble to a 3-Year Low as Housing ‘Crisis’ Worsens.” This site is more newsy than bloggy.

REwired

Rewired describes itself as “open commentary on everything impacting the U.S. housing economy.”

Here you will find articles ranging from the history of property valuation to the extent that high student loan debt is affecting mortgage qualification rates. Lots of more in-depth blogs here.

Bankrate News

Bankrate was one of the first, and is still the go-to site for many that are looking for a wide variety of loan rate calculators. It also boasts a good section that covers straight real estate financing news in a no-frills manner.

Geek Estate

This site claims that they “analyze Real Estate Technology and trends, and provide advice for tech savvy agents, brokers, technology vendors, consultants, and entrepreneurs.” We would definitely agree, and if you lean to the tech side, or just want to know how to begin to upgrade your business systems, Geek Estate provides great info.

REtipster

Investor Seth Williams says that his site will show you how to make money in real estate with less risk and more personal free time. If that isn’t the best of all worlds, what is? Worth a look, though.

RISmedia

Rismedia’s real estate site features news, blogs, advice, and some good general information. Not our favorite for cutting edge info, but still a good place for general guidance with an abundance of varied articles.

Rentec Direct

While this site focuses on landlords and their tenant issues, it also addresses tenant concerns like “What to do if you are facing eviction.” If any of your clients are landlords or want to ascertain the real costs of renting a property, this is a good place to start.

Agent Image

Agent Image is a real estate web development site. As you know, it’s critical to have an easily readable, modern and up-to-date site, and Agent Image will get you there. There are also blogging and SEO guidelines here.

Property Shark

Property Shark deals with high end properties in luxury destinations. Sample articles outline the 10 most pricey US zip codes, and if you have any interest in the upscale market anywhere in the US, this site is for you.

Realty Times

Realty Times is a nice general real estate newsletter with lots of agent tips and advice. It includes a useful local market outlook section and is easy to navigate.

Local Blogs

Minnesota Real Estate Journal

If you are familiar with your city’s local business journal, you’ll like what you find here: Local news, features, trends and advice all presented in a business-friendly manner. You’ll find all of the latest Minnesota property development news here.

MPLS Realtor

This is the Minneapolis Area Association of Realtors’ site, and is loaded with membership news, education opportunities, and market research. This is an excellent place to visit at least once a week as you keep abreast of major trend changes.

Minneapolis / St. Paul Business Journal

Local business journals are usually real estate intense, and this one is no different. You can find a few breaking real estate news articles every week, along with information about the top agents and where they are currently working. Their Top 25 lists are invaluable marketing tools.

Homes MSP

Homes MSP is a ReMax site. That said, there is some good information there—especially if you want some new recipes (!) Anyway, if you have some extra time, take a look.

REjournals

They say they are “the midwest’s leading source for real estate news.” No too many informational blogs, but there is a nicely updated Midwest real estate market section.

MN Property Group

This is another Remax site with listings interspersed with some worthwhile posts. You do need to check the pulse of the local market, and looking at sites like this will give you insight into what’s happening.

That’s a lot of reading, and we know you’re undoubtedly busy, but be sure to spend some quality self-education time adding to your cumulative local and national market knowledge.

For additional blog posts (new posts every Monday) from the C4D Crew, check out this page.

Renting: Is It the First Step to Homeownership?

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We’d all love to buy our own home someday. But for many of us, we may need to take critical steps to prove that we are ready to shoulder the burden of this enormous responsibility.

At first when you take the initial steps to enter into the adult world, you might consider looking for apartments in downtown Dallas,TX or something closer to your neighborhood. Instead of immediately trying to buy a house, or even rent one for that matter, it’s probably best to rent an apartment and see how this first step goes before making bigger commitments.

Or, you may be wondering why we consider renting the initial step toward home ownership. Some people are more prepared to enter this phase of their life than others. So instead of diving in headfirst without a life jacket, we’d like to help you be prepared and ready for this critical step in your life as you get older and consider starting a family.

With that said, we’ll now take a look at renting and all of the positive benefits of this experience. Then we’ll wrap it up in a nice bow and discuss why it’s the perfect precursor to owning your own home.

The Biggest Benefits of Renting an Apartment or House

Depending on your particular stage of life, you’ll potentially benefit tremendously as a renter as opposed to a buyer. Renting is great when you first reach adulthood because it gives you the ability to move out on your own without the need to deal with any of the responsibilities that come along with property ownership.

On the other hand, when you rent your apartment you have to put down the first month’s rent and the last month’s rent in many cases along with your first monthly payment. Why? Landlords ask for this money in advance because they want you to keep their property in pristine shape, so if you have skin in the game by putting down large sums of money that you could potentially lose, they know you’ll take care of their property.

Renting provides the perfect experience for you to learn additional responsibility as an adult. You’ll have to replace batteries in smoke detectors, replace your light bulbs and air filters when needed, clean the dishes and dust and vacuum the apartment, plus many other responsibilities that you might not have had to take care of when living under your family’s roof.

Clearly, renting an apartment is a big responsibility for everyone. As you begin to become more responsible as an adult, you’ll be able to move out of this first stage and consider buying property in the near future. No matter where you rent, it’s helpful to use sites like this to find a place. 

The Benefits of Renting to Prepare for Buying Your Own Home Someday

Renting is definitely a good idea, but it’s never going to be as good as owning your own home. As a property owner, you have a chance to invest in yourself by investing in your property. You’ll build equity as time moves forward and eventually you’ll pay off your mortgage in its entirety and own the property outright.

How does renting fit into this picture? Well, you have to start somewhere. You have to learn to become responsible and keep a roof over your head and food on your table by stepping out on your own at some point.

Renting might seem like a waste of money because you own nothing at the end of the experience. But nothing could be further from the truth; because your time spent renting is your proving ground for becoming a responsible adult.

Final Thoughts

You may not believe it in the beginning, but renting is definitely the first step toward home ownership. So look forward to this exciting experience and realize that it’s the first step toward becoming a responsible, well-rounded adult in the future.

Typical Down Payment On A House

Your Typical Down Payment On A Home

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Buying your first Minnesota home can be an exciting yet stressful time. You want to find the perfect property in the perfect neighborhood while negotiating a great price, and you want to get all of this done before someone puts in a better offer. You also want to find the ideal down payment on a home. That’s hugely important. So, what’s next?

Once you have accomplished that, you still must obtain financing, and that opens a load of uncertainty. First time Minnesota homebuyers have a lot of questions, and one of their main worries is, “how much money do I need for a down payment?” Whether you are working with a realtor contract or looking for alternative financing like a contract for deed, this LendingTree chart is helpful as it shows state by state average required down payments:

Down Payment House Chart

Consistent

As you can see, average down payments fall into the 11 to 13 percent range. This doesn’t mean, however, that there aren’t alternatives. Actually, in today’s mortgage landscape, you can expect to pay somewhere between three and 20 percent of the sales price as a down payment. Government backed FHA loans do have that three percent first-time buyer down payment rate, and you can obtain some VA loans with no money down.

Higher Risk?

Zero Down Payment

If your down payment is lower, your lender will perceive you as a higher risk, and the result may be a higher interest rate.  Again, government programs including the Agriculture Department’s Rural Development Program can cut your rate, but generally, the less you put down, the higher your rate may be. Also, simple math tells us that the less you put down, the higher your mortgage loan balance will be, and that of course translates to higher monthly payments. Also, consider that for most loans with a less than 20 percent down payment, you may need private mortgage insurance or PMI. This can easily add $150 or more to your monthly payment.

Typical Down Payment

Calculator.net is a great site that can help you figure out exactly what your monthly payment will be, as it walks you through taxes, PMI, homeowner’s insurance and other costs. There is even a place to enter other costs if you are, for example, buying a house with student loan debt.

Solutions

So, you’ve calculated that you need a $10,000 down payment to finance your home but are worried that it’s going to be difficult to save that amount. Here are some ideas:

  • Use your IRA.
  • Borrow from friends.
  • Search for government down payment assistance.
  • Ask your rich uncle for a gift.
  • Sell stuff.
  • Get rid of your car.
  • Ask your boss for help.

Alternative Financing

Sometimes non-traditional financing can be attained with a lower down payment. Rent to own and contract for deed are two popular alternative financing vehicles.

Contract for deed mn is a popular non-traditional method used to purchase homes. Rocket Lawyer tells us,

“under a Contract for Deed, the buyer makes regular payments to the seller until the amount owed is paid in full or the buyer finds another means to pay off the balance. The seller retains legal title to the property until the balance is paid; the buyer gets legal title to the property once the final payment is made. If the buyer defaults on the payments, the seller can repossess the property. In some states, a seller who repossesses a property must reimburse the buyer for the fair value of improvements to the house, as well as a reasonable amount for rent.”

Again, those that choose a contract for deed transaction many times find that down payment requirements are more flexible than those of traditional financial institutions. At C4D, we can handle all facets of Minnesota contract for deed transactions; they may be worth checking out. And as always, never enter into any real estate contract without first consulting legal counsel.