Getting an Arizona Land Loanis next to impossible if you’ve got rotten credit. However, you can still grab your slice of heaven with the right products and prep.
Whether you’ve just come across a piece of land that looks like it’ll be a great investment or you’re weighing the benefits of purchasing raw land to build your dream home, one of the most pressing matters will be how to pay for it. Those with great credit have challenges as it is, especially if the plot isn’t tapped into the grid. For those with rotten credit, making that purchase is often nothing more than a pipe dream. What gives?
Banks think Arizona Land Loanpackages are too risky. The reality is, if push comes to shove, you’re going to protect the home you live in as your priority. That’s human nature and the banks know it. The exception is when it’s an investment that’s actively generating cash, but that’s rarely the case for unimproved earth. That in mind, lenders try to make sure you’re never going to have to be in a position to choose whether to keep up with your payments or not, and they do that by looking into your history.
They will dig deep. They’ll check your credit score to make sure you’ve got a good history of paying. They’ll examine your existing debts to ensure you’re not stretched too thin. They’ll look into your cash flow to ensure it’s steady and strong enough to cover the balance for the foreseeable future. And, they’ll find out if you have reserves you can tap into in order to keep paying if things go south. It’s a frustrating process, but they have to minimize their risk, or they’d go bust.
If rotten credit is impacting your ability to get an Arizona Land Loan, you can take steps to minimize their risk, thereby making yourself a more appealing borrower. Make sure you’re paying all your bills on time every time without fail to improve your credit score. Come up with a personal budget that gets your debts paid off quicker.
There are two issues that can hurt your credit here; debt-to-income ratio (DTI) and credit utilization. Experts say up to a 43% DTI will still allow you to qualify for a mortgage, but lenders look for a 36% or less. The catch: this isn’t a traditional mortgage. You’ll need to do better. The same is true of credit utilization. While 30% may be standard for other types of loans, you’re going to have to do better to get specialized financing. With debts paid down, you’ll need to work on establishing reserves. All things considered; it can take years to put yourself in a position to qualify.
The good news is, banks aren’t the only ones who can provide you with an Arizona Land Loan, and having rotten credit is not a barrier to getting funding with certain options. Hard money is one such option which relies more on having a good business plan and solid loan-to-value (LTV) than credit. If it sounds like this is the best option for you, touch base with a broker who specializes in hard money lending who can walk you through the process and get you the best possible rates.
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About the Author: Dennis has been working in the real estate industry in some capacity for the last 40 years. He purchased his first property when he was just 18 years old. He quickly learned about the amazing investment opportunities provided by trust deed investing and hard money loans. His desire to help others make money in real estate investing led him to specialize in alternative funding for real estate investors who may have trouble getting a traditional bank loan. Dennis is passionate about alternative funding sources and sharing his knowledge with others to help make their dreams come true. Dennis has been married to his wonderful wife for 43 years. They have 2 beautiful daughters 5 amazing grandchildren. Dennis has been an Arizona resident for the past 40 years.