How to Help Clients with Bad Credit Buy Real Estate

Welcome to the Close More Deals podcast. Today, I'm gonna be talking to you about someone who maybe has bad credit, but they wanna purchase properties. So I'm gonna give you a couple different angles here, and I'm gonna try to be quick because this is a topic that I could talk about forever Cause there's just so many different nuances. So we're gonna break this down into investment properties. We're gonna break this down into primary residences, that type of thing.

So you can kinda see both angles. We'll mix in residential and commercial as well. So on the residential side, if the client has less than 20% down and they have a credit score under 600, more than likely, are not going to be able to get approved for a CMHC loan. They would need to have 20% down or higher to be able to move forward. Now there's a couple things here.

Sometimes the bad credit is wrong. So I encourage every client to get their own Equifax report. And if there's things on there that are not right or maybe, you know, the lender said, hey. I you know, I'll I'll make a payment arrangement with you. You can pay the bill, you know, twenty days late, and we won't mark it.

But then they ended up marking your credit as late even though you had the payment arrangement, you can dispute that. Right? And then those late payments will come off if the dispute is successful, and you can move forward. And that's right on Equifax's website. You go to Equifax, and it says dispute, credit dispute your credit report, and then you fill out the form, mail it in, fax it in.

They even have an email as well. It can take two to six weeks. You hear back. And if they did remove it, then your score gets an instant jump. Okay?

So that's how we can help clients with bad credit right away. Again, with 20% down or more, they're they're usually able to move forward, but then we're not dealing with banks. We're dealing with b lenders. And if the credit scenario is really bad, we're dealing with private lenders. So now let's talk about rental properties.

So same kind of thing with rental properties, although the 5% down is not available. Right? It's 20% down. The lenders yeah. I'm I'm gonna say it's pretty much the same as buying your primary home, except that you need 20% down instead of five.

But if you have bad credit, then, yeah, you are looking at a b lender or, again, potentially a private lender. Now it doesn't have to be long term. So that is the one thing I think clients when they hear, I have to go with the b lender or private lender, they think it's like this forever thing. We only try to do it as short term. We just closed the transaction this week.

Actually, the client had consumer proposal and all these late payments and stuff, but they received funds. And we guide them, and we said, okay. Pay off everything. Don't be late anymore. Six months, we're gonna reconnect because we we got you this private loan so you could move forward.

But we're gonna reconnect. And if your scores have jumped from paying everything and obviously not having any further late payments, then we can look to the b lender, and we'll probably have to stay there for a year or two. And then once credit improves further, then we're gonna bring you back to the bank or a bank or equivalent of a bank. Right? So we have a structured plan for this client, and it's going to work.

But let's go a little bit on the commercial side. So this is where I was shocked years ago when I started doing the commercial loans. The credit score doesn't matter so much because when you're doing a commercial property and I wanna take a step back too because when people hear me say commercial properties, I think there's a theme that that means it's a a retail or a business or a huge apartment building. No. You can get commercial on even a single family property.

Okay? We've got all the connections and contacts. If this is you and you're hearing this and you want access to this, give us a call. All the details are in the show note. But what it is is it's commercial lending.

So they they in underwriting, and they look at the property, and they determine if the property can carry itself. And if it can, then you've got the loan. Like, you're good. So because of that, they're not really looking at that credit score. So we had a client with mid four hundreds as a credit score, bought a duplex, got a lending rate.

So that's the beauty of commercial. Right? There's that a lending rate. There is a fee when we broker commercial loans. They don't the lenders, they don't pay us.

Not like residential. Right? Residential lenders will pay us. A lenders, I'm I'm mainly speaking of. B lenders, most do, but it's a minimal amount.

So there's usually a broker fee on top, and then private lenders don't pay either. So there's also the the broker fee on top. But with commercial, we have to have that broker fee there so we can get paid. But the benefit is you're getting those a lending rates. So as of today, when I'm recording this early March, right, we're talking mid fours, maybe to five on a five year fixed on a rental property through commercial.

So it's, like, not bad at all. Right? It's it's not bad. Where be lending could be six to seven, private even higher, you know, up to 12. So when you consider that you're getting that massive interest savings, it's just it's fantastic.

So that's kind of that. And then high level, right, again, dispute that credit report. I think that's amazing. There was a like, the when you dispute a credit report, the people you're disputing with have to have to provide proof that you were late. So even if you were late, but you made an agreement with them and they don't have a paper trail, like, it's gotta come off.

Right? Because you're you're disputing it, and they have to battle against that dispute. And if they don't have, you know, the records, then then it it comes off too. So even if there's some gray area and and, you know, the the the lates were from you, by still disputing, it could potentially come off. So, anyways, I gotta wrap up this episode.

I hope it helped. I hope you have found value. If you have any questions, let us know, and look forward to seeing you next week. Take care.