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homeownership

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.

Minnesota Home Owner

Contract For Deed: Homebuyer’s Guide

 1024 683 Sam Radbil
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The Minnesota contract for deed process has been outlined succinctly below by the Greater Minnesota Housing Fund:

A contract for deed is an alternative financing agreement in which the seller finances the sale of the property rather than a lender. As with traditional forms of financing, the buyer takes possession of the home after the closing of the sale. When buying a home through a contract for deed, the home-buyer agrees to pay the seller the purchase price over time with interest in monthly installments.

Minnesota Contract For Deed For Homeowners

Who Typically Utilizes the Minnesota Contract for Deed Option?

Minnesota Realtors report that a substantial number of consumers that have been turned down for conventional mortgages consider contract for deed financing. Many hard-working individuals face credit issues at times, and contract for deed homes in Minnesota can be a great way to overcome mortgage financing problems like:

  • Bankruptcy
  • New job
  • Divorce
  • Non-provable income
  • 1099 income
  • Small business income
  • Gig economy income
  • Barter income

Minnesota Contract For Deed: How It Actually Works

The contract for deed process is an installment sale. With a reasonable and sometimes smaller down payment, a home-buyer can purchase a home without the intense credit scrutiny normally experienced with traditional mortgage financing. The owner of the home is the seller, and that owner finances the sale. The buyer immediately takes possession of the property, but the deed remains with the seller until all payments have been made.

What Can Derail Conventional Mortgages?

Since the Great Recession of 2009, requirements to obtain conventional mortgage loans have been seriously tightened as anyone that has applied for a loan can readily attest. Any Minnesota Realtor can recite horror stories of good people with decent credit that were arbitrarily turned down at the bank. One even mentioned a client that had $1,000,000 in cash in the bank, had recently retired, had great credit, but was denied a loan because of a poor income to loan ratio! If millionaires can have problems obtaining financing, imagine the problems regular working home-buyers could face.

Minnesota Contract for Deed Advantages to Homebuyers

A great article by Alex Everest lists the following advantages to a contract for deed deal:

  • You can now buy your home – an unfriendly bank will not be a problem.
  • It’s easier to qualify – contract for deed sellers understand credit issues.
  • No lender fees – those “junk” closing costs simply do not exist in contract for deed transactions.
  • Quick closing – you can move as fast as you and the seller desire.
  • Tax benefits – you are treated like the owner by taxing authorities.
  • You can improve the property – you don’t need a landlord’s permission to remodel.
  • You have a chance to rebuild credit – you can have your lender report your payments to the credit bureaus.
  • You have the right to pre-pay – there are usually no pre-payment penalties.
  • You will gain from property appreciation – you can build equity.

Possible Issues

  • You don’t get title to the property until you have paid for it – you don’t “own” the home until you have paid for it in full.
  • If you become delinquent, the foreclosure process can be quick – this process could take only 60 days.
  • Your seller does not perform his/her obligations to his/her bank – the property may have an existing mortgage, and the seller, instead of using your payment to make his/hers, defaults on that mortgage.
  • The property is encumbered – if you don’t do a title search you may be subject to mechanic’s liens, etc.
    Your transaction has breached the seller’s “due on sale” mortgage clause.

We Are Different and We Can Help

We’re not going to lie to anyone that is looking for a Minnesota contract for deed, as we have seen significant instances of fraud and abuse. Sometimes an individual seller designs a contract with high monthly payments that is destined to fail . Unwary buyers can be saddled with a fixer-upper that has many more problems than anticipated. We have even witnessed predatory sellers that look for vulnerable and uneducated buyers in order to extract a few high payments; they eventually foreclose and then repeat the process. That is not what we do here, however.

Our Process

Normally, if you are interested in a contract for deed, a Minnesota Realtor will show you the homes listed with contract for deed financing as an option. What we do is different. If you find your dream home but cannot get conventional financing, C4D buys if for you. Then we own the home, we gain clear title to it, and we sell it to you. You get to pick the exact home you want.

Yes, of course we finance our purchase, but we accomplish that with our bank, and our bank requires no due on sale clause. They know exactly what we are doing, and in fact they protect you—the buyer–as a proper title search is completed. We are an established business and we make money by having deals succeed and culminate in your free and clear home ownership. We facilitate this process and do everything we can to ensure that the financing structure will work for you as well as for us. You are not dealing with an unknown sketchy owner you found on a home loans for bad credit site.

Apply Conventionally First

We encourage you to apply for conventional financing before you come to us. If that doesn’t work, however, inform your Minnesota Realtor that you are taking the deal to C4D. Of course you will have to fill out an application, and have a down payment—though in certain circumstances we can even help with that. Remember to assure your Realtor that we protect their commissions.

We’ll quickly analyze your situation; our goal is to work out a deal that benefits both parties and puts you on the path to home ownership. The Motley Fool gave us this great chart that shows what happens when you pay off your home instead of paying rent:

Home Price vs. DebtImage source: strawhomes.com

Here’s another one from Edelman Financial:

Home Ownership Equity

Start Now

If you’re renting, have had credit issues, and don’t want to wait for that ethereal day when the bank finally might say yes, contact C4D today. We will do everything we can to make home ownership a reality and not just your dream.

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.