Once Again, Your Credit History Matters

We are back to a place and time where your credit history matters. For some, that’s good news. For others…

There has been a lot of talk about Countrywide, failed lenders, the credit crunch and the liquidity crisis of the secondary mortgage market. But here is a fact, for those with a little cash and great credit the housing opportunity still exists.

We had about a 4-6 year run where people with marginal to bad credit histories could buy houses with little or nothing down. Heck, even real estate investors with scores as low as 660 could buy non-owner occupant homes with no money down. (How smart was that by the lenders?)

Heck, as long as they were giving money away I bought a rental property with a 100% loan. Though I’m not now whining that next year one of the loans adjusts when the ARM matures. I took the time to understand the loan I was getting.

But that has nothing to do with anything other than to say that your credit history is going to help you or hurt you for the next 12-18 months as the economy and the lenders adjust to the current lending standards.

When I was 21 years old I was newly married and had moved to Suburban Washington, DC. When I arrived I literally only had $78 to live on until my first paycheck from my new job. That’s kinda tough. As soon as I got paid and my wife had her first check we ran out and bought stuff to reward ourselves. On credit.

That was well and good until I realized that people had extended me more credit than I could handle. Those darned people! It got ugly. Bill collectors would call. My new wife would cry. Even my Dad called and told me that if I didn’t get this straightened out it would haunt me for years and years to come.

I took his advice. I got a second job. And ate a lot of Hamburger Helper. Though only after having paid a couple of the bills more than 30 days late. Everything got under control and two years later when one of our cars died I decided to go buy a new one. (Having learned that I should only get one I can afford.) They quoted me an interest rate but after having run my credit bumped it up.

Wow. My Dad was right. And I was mad. Not at the evil lenders. At me. I had gone through 15 years of education and had not learned thing about handling money. But was it “their” responsibility or was it mine to learn what I needed to know?

Most of the easy money is gone. But I keep telling my real estate investors that it shouldn’t concern them too much. At least on the acquisition side of things. After all, you should have reserves planned before going in to a new purchase. You should have at minimum a 5% down payment to even make most properties that I would recommend break even after ALL expenses. More likely, 10%.

With cash reserves, a 10% down payment, a solid credit history and steady employment you will have no problems finding a lender.

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