Investing in Houston Real Estate With Bad Credit
The popular trend on television is people flipping homes to become wealthy. Flipping homes is one of the most popular ways to invest in Houston real estate currently. The idea sounds good, but what if you have a low credit score? If you have a credit score below 601, which the credit bureaus mark as the line between fair and bad credit, it could be difficult for you to find funding.
If you fall into this category, it might be more difficult for you to get the credit to invest, but it is not impossible.
Purchasing a Houston Investment House vs Purchasing a Home to Live In
Choosing to purchase an investment house is much more complicated than purchasing a Houston home to live in if you need to use a loan for the purchase. A loan for an investment property usually comes with a higher interest rate than a primary residence purchase. In addition, most lenders will usually require a better credit score and a larger down payment for an investment property versus a primary residence purchase.
Lenders have to be more careful loaning money for investment houses to protect themselves from loan default. With that in mind, your finances will be investigated even further, and formulas are used to calculate for any shortages in the expected rental income.
Investment Options with Bad Credit
Obtaining a loan, especially a loan for a Houston investment property, with bad credit is difficult. If you can borrow money from family or a friend, or finance your own investment through any money you may have in savings, stocks, or even your retirement, you will have an easier time financing your investment.
For some, those options are not available either. If you fall into that category, don’t give up. You can work toward obtaining your own loan for an investment property by following one or more of the following strategies.
Improve Credit Score
Whether or not this is your only option, it is always a good idea to improve your credit score. Start with a credit check to see what is keeping your score down. From there, you need to resolve any issues that may be on your credit and you need to begin paying down loan balances.
While you are undergoing the process of improving your credit, avoid putting yourself into further debt.
Use a Hard Money Lender
This is not a suggestion to use a deal cooked up in an old abandoned warehouse. These lenders are groups or private individuals that are more willing to put up money for Houston real estate investments with people that have poor credit.
The drawback to these lenders is that they will usually require a much larger down payment than a traditional lender.
Whatever path you choose to finance your Houston real estate investment, the important part to remember is to be patient and to not give up. With hard work and persistence, your dream of investing in Houston real estate and becoming the next wealthy “flipper” can become a reality.