How can you get a bank loan for a house when you don't even have nearly as much for collateral?

Question

I was looking at a book about real estate investing and it says you can take a small amount of money (Example:$10,000.00 and have the bank give you a $70,000.00 loan added to your $10,000.00 and you can invest in real estate by buying your first home. Now, how in the world is the bank going to give anyone that much money when they don't even own that much? Plus, what if they're credit is bad? I guess they can't invest in real estate can they? If they still can, please explain to me how this is possible regardless of credit history?

I got this information out of a book about little or no money down on real estate investing. I think this is B.S., especially I went in the bank and tried to get a home loan and they told me my credit was way too bad.

Answer 1

The house IS the collateral . If you don't pay for it they sell it out from underyou and take all your equity with it

Answer 2

First, you won't get it if your credit is really bad. I'm sure the book tells you this.

Why does a bank loan you money on a car? If you have $2,500 to put down on a car, and you buy a $25,000 car, obviously, the bank is trusting that you have a good job, and you will pay back the loan.

It is the same for a home, except that it is on a larger scale. Plus homes hold their value longer and generally increase in value more than an automobile. But, your credit-worthiness is what helps them determine if they will loan you money.

Answer 3

The house is the collateral. That's how mortgages work! If their credit is bad, they probably won't get the loan in the first place -- or if they do they'll pay an exhorbitant interest rate.

Answer 4

Banks want your credit score to be at least in the 600's and higher. They usually use the house your buying as collateral. If you dont pay, the bank gets the property in foreclosure. Hopefully they can sell it for what you owe on it otherwise you will have to pay the arrearage on it. Good luck.

Answer 5

very easily. Banks stay in busines by lending money. You can easily get 80,000 or 500,000 or even a million with no collateral at all. You just need to know how to structure it and have access to wholesale lenders. I put together programs like that all the time..even with less than perfect credit..Talk to a good mortgage broker that is wiling to educate you and not rip you off.

Answer 6

Your credit rating is going to determine how much you are going to pay each month. The worse the credit, the more risk the lender has, so they offset that by charging higher interest.

The more you put down makes the lender feel more comfortable that you will make the payment or risk losing your investment,

The lender is willing to do that because you are borrowing against a durable asset that generally appreciates vs. when you purchase a car that depreciates.

Hope that helps.

Answer 7

the book is probably a scam, especially if it asks for money to give you some secret way. Banks rely on credit. Maybe you can get a cosigner to put up something of value that will equal the down payment. That is an option that I did and it worked.

Answer 8

Sorry to assert this yet there is no economic company or the different loaning corporation provides you with $750.000 on a house relatively worth in basic terms $a hundred.000, because of the fact in case you have a head time to pay up how might they get their money back? sell the homestead for a hundred grand and then what?

Answer 9

your house is your collateral.
if you have fair credit history and steady income, any bank can even fund you 100 % for your home.

Answer 10

U GAVE UR OWN ANSWER BAD CREDIT. IF U CLEAN UP UR CREDIT U CAN BUY A HOME AND U KNOW WHAT THE COLLATERAL IS UR HOME, NO PAY THEY TAKE EASY AS THAT!