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home financing

Buying a House After Foreclosure

Buying After Foreclosure: Your Next Steps

 1000 500 Sam Radbil
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While many people think that foreclosure, like bankruptcy, signals financial death, this is simply not true. The chart below shows that distressed Minnesota home sales have significantly fallen, but if you lost your home to foreclosure, contrary to what you might have read, you may find yourself in the market for buying a house after foreclosure.

Distressed Home Sales

What Is Foreclosure?

Our friends at Investopedia define foreclosure like this:

Foreclosure is the legal process through which a lender seizes a property, evicts the homeowner and sells the home after a homeowner is unable to make full principal and interest payments on his or her mortgage, as stipulated in the mortgage contract.

Here’s why it might have happened to you.

Buying A House After Foreclosure: The Reasons

You may have faced foreclosure for one or a combination of the following reasons:

  • Major illness
  • Job loss
  • Spousal death
  • Predatory mortgage practices
  • Adjustable rate loans
  • Unexpected relocation
  • Divorce
  • Excessive credit card debt
  • Lots of student loan debt
  • MN Bad credit

Regardless of the cause, you can take steps now to first rebuild your credit, and subsequently find yourself buying a house after foreclosure.

Credit Repair

Credit Repair for Foreclosure

The first thing to do is repair your credit. If you have overwhelming debt and are continually making payments late, it will be difficult to make progress. It is important to become cash flow positive in order to begin chipping away at your debt, and a legitimate credit counselor or a good financial advisor can help you here. If you don’t feel that you will ever be able to get out from under your particular debt situation, bankruptcy may be an option since this would give you the proverbial clean slate to begin again.

Everything Has Its Price

If you have gone through foreclosure, you already know that foreclosure will quickly drop your credit score – maybe 100 points or more. Bankruptcy can do the same thing, so there will be a time period when no one wants to lend you any money. You can rebuild your credit but it means being diligent and taking small steps. This FICO chart explains what categories constitute your credit score:

Buying A House After Foreclosure

Get A Card

The first way to repair your MN bad credit is to get a credit card. This may have to be a secured card; in this situation you deposit money with the credit card company and basically borrow against it. You do this because if you make on-time payments, these will be reported to the credit bureaus, and your credit score will rise. Make sure you are never late on any payments, and that you do not make the same mistakes that got you into trouble the first time.

Time Is Your Friend

If three years have passed since your foreclosure and you have had stellar credit since that time, it will be possible for you to get a mortgage.  You probably will have to come up with a 10 percent down payment, and lenders will be a lot happier if they see that you have saved that amount. Still, you will face a load of scrutiny, and you will pay a higher loan interest rate. You may be turned down by a number of lenders, and that can be a frustrating process. Keep in mind, you can find ways to make quick cash. For example, you could use the ibotta referral code to save a few bucks and get your finances in order.

Contract for Deed Financing

This is where your friends at C4D can help. We are a legitimate Minnesota business that helps people with bad credit issues, and we help them become homeowners. Our process looks like this:

  • You find your dream home.
  • You fill out our online application.
  • We contact you.
  • We determine if we can help.
  • If so, we buy the home.
  • Then we sell it to you utilizing a MN contract for deed.

Please feel free to contact us if you have any questions. Bankruptcy and/or foreclosure are traumatic financial events, but you can certainly recover from them, and we are here to help!

Buying A House In Minnesota

Buying A House In Minnesota: The True Cost

 1000 500 Sam Radbil
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You already know that home buying a house in Minnesota is complicated, but if you haven’t been through the process there are many details you need to be aware of. Even if recently you bought a car and felt like you were on your game at the dealership, buying a house is definitely like playing in another league.

Here’s what you really need to know:

Everyone Likes to Get Paid

Home deals regularly generate multi-hundred thousand-dollar deals, and lots of people want a piece of that. Lawyers, Realtors, title companies, surveyors, paralegals and even more groups are all in the hunt for your money, so let’s look at some of the costs.

Realtor Commission

Buying A Minnesota House Realtor Commission

Standard real estate commissions are six percent of the total deal with the amount split between Realtors or real estate agents involved. Even though this amount is almost always paid for by the seller, you can bet that it has been rolled into your purchase price.

Title Policy

When you buy a property, you must be sure that you are not purchasing someone else’s problems. Title companies insure that you will have a clean title; if something comes up later—like a lien the title company did not uncover—the title company will have to make things right at their expense. This can cost you $1500 to $2000, however.

Document Preparation

Lending institutions love to charge for you document prep, even if they are only cutting and pasting into a form document. This can set you back $500 or more.

Attorney Review

The same goes for the cost of having the bank’s lawyer review the deal. This can cost $150 – $500. And if you need more information about real estate law, check out this real estate law resource.

Buying A Minnesota House Using Attorney

Underwriting Fees and Application Fees

Lenders also may charge you random amounts for merely applying for your loan. The due diligence they normally perform is often charged as an underwriting fee.

Fee For Buying A House in Minnesota

So, you go to the bank, they approve your loan and they give you an interest rate. You’re done, right? Not so fast, because the bank many times will charge a fee to lock in your interest rate for a fixed time period. Don’t forget to include this fee in your budget!

Origination Fee

This is free money for the bank. They may charge one percent of your total loan just to give you the privilege of borrowing money! If you need a more clear definition of the origination fee, you can take a look at this resource from Investopedia.

Discount Fee

Mortgage Interest Rate

If you want a lower interest rate when you’re buying your house in Minnesota, you can pay upfront. This is sort of like the $199 per month car payment that requires $3,000 at signing. And when it comes to your interest rate, take a look at a few of the major factors that determine the actual rate.

Credit Report Fee

The bank can access your credit report for free—so can you at Credit Karma—but they might charge you 35 bucks anyway. Remember, pay your bills on time, take out smart loans for other purchases and make sure you keep track of changes to your credit score. It’s a very important piece of the home buying process.

Homebuying Credit Score

Appraisal

You know that you are buying a house in Minnesota at market rates, but your bank wants to be sure, so they will send a $500 appraiser out to confirm that the sales price meets the neighborhood comps—of course at your expense. For more information about what an actual appraisal means, check out this real estate appraisal resource from Wikipedia.

Home Buying Appraisal

But Wait

That’s not all as the bank may even charge you a wire fee to send your loan proceeds to the seller. Creative financial institutions are constantly looking for more ways to add costs to your home buying transaction, and you may be even charged a signing fee for executing your loan documents!

Having Trouble?

Remember, traditional financing for buying a house in Minnesota isn’t always the only way to go. We at C4D make home ownership possible through MN contract for deed. If you are having trouble with the bank, have large student loan debt, have MN bad credit, have liens, judgments, or just need an alternative financing solution, be sure to contact us; we’ll do everything we can to make your home ownership dream come true.

Bad Credit Home Financing: The Bad Credit Blues

 1000 500 Sam Radbil
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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.

Minnesota Contract For Deed: 2018 Realtor Guide

 1024 451 Sam Radbil
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As a Minnesota Realtor, you have probably seen some bizarre and arbitrary loan rejections, but that doesn’t make you or your client feel any better. Approaching a lender for bad credit loans may not help since their rates can be predatory. What you do need to do is find a lender that will facilitate a contract for deed deal.

For example, you’re confident that you have a reasonably qualified client, and you’ve found them the perfect home. Your client is excited, has a down-payment, you write the offer, it’s accepted, and you’re off to the bank. The bad news comes quickly, however, as the lender claims that your buyer doesn’t qualify for financing. According to GoBanking Rates, buyer financing can be denied for not only a weak debt to income ratio but also for any of the following reasons:

  • A recent job change.
  • Credit report errors.
  • A property appraisal that comes in less than the purchase price.
  • Old liens and judgments.
  • Recently opened or closed credit card accounts.
  • Early retirement.
  • Excessive business debt.
  • 1099 income/inability to prove written off expenses.
  • Questionable tax returns.
  • Inability to substantiate where the down payment came from.

Legitimate Financing with Contract for Deed

The Minneapolis Federal Reserve Bank wrote a great article explaining the methods, risks and benefits of a contract for deed to finance Minnesota real estate. They simply state:

In a contract for deed, the purchase of property is financed by the seller rather than a third-party lender such as a commercial bank or credit union. The arrangement can benefit buyers and sellers by extending credit to homebuyers who would not otherwise qualify for a loan. Indeed, public and nonprofit housing advocacy organizations have used the contract for deed as a tool to help low- and moderate-income households attain homeownership.

This U.S. census bureau chart shows a solid percentage of contract for deed homes and Hispanics are major subscribers to this type of bad credit loan solution.

Owner-Occupied Homes with Contracts for Deed in The U.S.

Minority Homebuyers Using Contract For DeedSource: American Housing Surveys 2001, 2003, 2005, U.S. Census Bureau.

Minorities Want To Buy Homes

Furthermore, this recent report from ABODO shows Realtors in Minnesota exactly where minority homebuyers are active, and Minnesota is right in the middle at 40 – 49 percent.

ABODO Report on Minority Homebuyers

The Mechanics of Contract for Deed Minnesota Financing

For individual contract for deed sales to work properly, the seller must realize that they will not get the full purchase price immediately. Instead they are offering an installment plan sale to their prospective buyer. While the buyer will gain immediate occupancy, the seller still holds the deed will remain the owner of the property until all payments are made. This is a great path to home loans with bad credit for the buyer, but the seller, again must be in a position to take installment payments rather than receiving a lump sum payment.

Free and Clear … and Legal?

Contract for deed Minnesota home financings are simpler if the seller owns the property free and clear of all liens and mortgages.  This way, the seller must wait until all installment payments have been made, but since there are no third parties—like banks—to deal with, all of the money goes to the seller; they merely have to wait longer to get the total amount due them.

While a seller with a bank mortgage on a property could sell that property on a contract for deed basis, this could be a problem for a buyer since the seller’s original mortgage may prohibit this type of transfer, and that could put the buyer at risk, if the bank discovers the sale.

In many states, especially Texas, this kind of solution to a loan with bad credit is done frequently. When the buyer asks about the due on sale clause in the seller’s original mortgage, the usual reply is “the bank will never find out, and if they do, they won’t care. Banks would never foreclose on a property if someone is making the payments.” Yes, this may be the case in some situations, but you as a Minnesota Realtor know that it is not prudent to believe that someone “would never” do something.

How You Can Get This Done

Luckily, there are companies like C4D. C4D specializes in Minnesota contract for deed deals. Unlike some individual sellers, however, C4D does not put the buyer at risk with original mortgage due on sale clauses because their banks do not require them. C4D has spent years developing solid banking relationships, and this drives successful and mutually beneficial financing arrangements.

How Contract for Deed Actually Works

Certainly, Minnesota real estate professionals should try first for conventional bank financing. If this fails, however, take the deal to C4D. C4D will analyze the situation, and quickly let you know if they can help. Minnesota Realtors understand that while C4D cannot automatically take any deal, they do have the approval leeway that many banks just do not possess.

C4D looks at every deal individually and independently. This is not cookie-cutter lending because C4D understands that all situations are different. Some loans may require different down payment percentages, and in certain circumstances, C4D can even help secure down payment dollars.

If a deal is approved, C4D physically buys the property from the seller and offers a contract for deed to the buyer. As in classic contract for deed financing, the seller owns the property, but the seller is now C4D.

Contract For Deed Is Simple

Since the 2009 meltdown, mortgage approval can be tricky. You can have a great buyer but the banks just say no. If this happens to you, bring your deal to C4D—a local Minnesota company—and see what they can accomplish. By the way, your Minnesota Realtor commission is totally unaffected by this process, and you will receive the full amount upon contract execution.

What are the Next Steps?

If you have any questions about Contract for Deed financing, you can always contact us here.