Renting and bad credit

Radiance · #1 (**permalink**) 07-23-2009, 11:11 AM

Sorry I keep on rambling about this.

Have you had any experience renting with bad credit?
If I can not solve my housing situation and decide to walk away, I will need to rent with a very destroyed credit.

I was originallly concerned about schools, but my son is in preschool and there are no zoning requirements. When he starts elementary I when I need to be on a good school district. This will not happen in 3 more years (he is 1 1/2).

In 3 years, will I be able to have a repaired enough credit so I can rent on a good place?

Maybe this will not be needed, but I am trying to see all my options.
Thanks!!!

disneysteve · #2 (**permalink**) 07-23-2009, 11:59 AM

How is your credit right now? If it is okay, could you rent first before walking away from the house? That way, you'd pass the credit check and have your place lined up before the default on the home loan hit your credit record.

creditcardfree · #3 (**permalink**) 07-23-2009, 12:14 PM

Steve suggested what I was thinking.

Radiance · #4 (**permalink**) 07-23-2009, 01:35 PM

With the bank delays on giving me an answer on the hardship I allowed myself to get to the brink of being late and didn't allowed myself any time to manouver. It is not like I could have rented in advance "just in case" they declined.

So I learned their decision yesterday on a letter dated one day after my July due date. And now I am just 10 business days to be 30 days late in Aug 6th!

I am thinking that when I get paid July 30th I could pay the $645 and bring me current by delaying the paynents on everything else. That would make my other payments late but not 30 days late.

That is not a sustainable solution but would buy me until Aug 30.
Problem is that by paying and becoming current HSBC will not give priority to my case they have told me numerous times that people who are late are priority or "you are not late 'yet' so you are not high priority" "we have more cases than we can handle"

my current score is 740...

Radiance · #5 (**permalink**) 07-23-2009, 01:41 PM

I guess next question is after you have 1 payment late, how much time does it take before it shows on the credit report.

Also, if I choose to try short sale, that is whole ball game, but let's explore the walk away scenario for now.

graceful · #6 (**permalink**) 07-23-2009, 03:31 PM

Honestly, I am very strict regarding the credit report. I would be wary of a prospective tenant that is unable or not paying their mortgage.

However, not every Landlord is as strict as I am and considering the situation in South Florida, if they are too strict, they may have no one to rent to.

I would be upfront with your situation that you were making all your payments including your mortgage on time and your bank was unwilling to work with you and take you seriously until started to default on your mortgage payments.

If that does happen, make the mortgage payments "to yourself" and keep it in your savings account. You can show the prospective Landlord that you had the money to pay the mortgage and set it aside to do so but the bank would not work with you. And now you have the money as a cushion to make sure that the monthly rent will definitely be paid. Show them documentation where you tried to work with the bank and where they stated that you were not a priority because you were paid up to date.

If a prospective tenant comes to me and he not only has defaulted on his mortgage (which is usually his largest expense) AND has otherwise spent the money that should have gone to the payment, has no emergency savings, still has major debt and is living paycheck to paycheck, that is a BIG sign to me that they can not afford to pay me rent on time.

However, if they were in a situation where they had no choice because of the red tape with the bank but HAD the money for the monthly payment and could show it accumulating in the bank, some Landlords may be understanding of the situation and take that into account.

You have to show that you are a good risk as a tenant. Many Landlords will see the mortgage default and pass. You have to market yourself. Go prepared with all the canceled checks for all your TIMELY mortgage payments for X months, a statement of when and why you stopped payments, documentation showing that you tried to work with your bank and that they refused to do so, bank statements showing that you set aside the money that BELONGED to the bank if they had been willing to work with you that you now had available with any other EF savings to ensure that you can pay your rent in full and on time each and every month, income statements, and anything else you feel will make the Landlord willing to take a risk to rent to you.

Good luck.

Inkstain82 · #7 (**permalink**) 07-23-2009, 07:28 PM

I have pretty awful credit, and I was once taken to court and had a collection for unpaid rent against me, and then taken to court again when I wasn't paying the payments we agreed on. (They did end up getting paid in full a few weeks after that).

I've never once had a problem getting an apartment, as long as I can put up first, last and deposit.

simpleyme · #8 (**permalink**) 07-23-2009, 10:43 PM

I think the real trick is just being the best out of the people who have applied ,so I would think the less desirable the area you try to move to the more likley you will be approved

momof1in150 · #9 (**permalink**) 07-24-2009, 04:24 AM

Not all landlords do a credit check. I am a REALTOR and our agency doesn't do credit checks but we check your references thoroughly. We understand that people are having a hard time in this market.

Most states do not allow you to collect first, last and security. RI only allows first and security. Check with your state laws on what they can collect.

wincrasher · #10 (**permalink**) 07-24-2009, 06:24 AM

Mostly the big complexes pull credit reports. If they charge an "application fee" you can be that they are buying a credit report.

99% of owner-landlords of single family homes are making a judgement based on a meeting with you. They'll ask about your income, maybe want a pay stub, and a few references.

It took over 3 months for my new mortgage to even appear on my credit report. I suppose that a late payment may take a month or so to appear - which is not such a bit hit. Multiple months late and then the foreclosure to post will take several months so you have plenty of time to find a place with still good credit on your report.

Radiance · #11 (**permalink**) 07-24-2009, 06:56 AM

I think I have several perspectives at the moment
1) Rent now that my credit is intact, already on a good place with good schools.
2) Rent now that my credit is intact, but on a medium class cheaper community, I'll have 3 years before my son needs a zone based school and by then I would have repaired my credit as much as I can, including paying my rent on time each month.
3) Stay home rent free for about the year that it takes to foreclose, use that time and money more or less like this
[1550 monthly payment for 12 months]
- Month 1= to the savings account as an emergency fund
- Months 2-7 = pay off all credit card/unsecured debt, this frees 410/mo
- Months 8-12 = deficiency fund
When I am done and with my credit on the drain, I'll need to rent from a person and not a development to avoid the credit check. Work on repair credit and two years later move to a good school dictrict. I will have a payment plan for the deficiency with the lender (or via a judge if the lender acts stupid)

Options 1 & 2 include using any savings in the fashion I just described. If I rent on a good place I'll have 700 extra, if I rent cheaper place, 1000,

graceful · #12 (**permalink**) 07-24-2009, 12:07 PM

#3 is the practical option.

However, #2 is the ethical option.

Keep in mind that the bank will have to foreclose regardless of any of your options.

If you chose the first 2 options, will you be able to work out a deal with the bank to cap off the maximum amount of your deficiency if you surrender the property back to them and thus they avoid the legal expense of foreclose in order to get possession?

I believe that in FL the banks can legally come after you and your assets for the deficiency. Better to get it "settled" with the bank rather than have them haunt you for years, especially since you do make a good salary and thus make a good target for the bank to go after.

Radiance · #13 (**permalink**) 07-24-2009, 01:16 PM

Quote:

If you chose the first 2 options, will you be able to work out a deal with the bank to cap off the maximum amount of your deficiency if you surrender the property back to them and thus they avoid the legal expense of foreclose in order to get possession?

I don't think my ability to work out a deal is affected by where do I live. Actually staying home, taking care of it and listing it for sale will increase my chances of the bank accepting a short sale or deed in lieu (surrender property back).

Unfortunately I am with HSBC and they have change policy and currently they rather foreclose you than accept a short sale or deed in lieu, I will try anyway, but I am not very hopeful. I offered a shortsale months ago and they declined, now prices are even lower so it is less likely they would approve a short sale. Same with deed in lieu, they will not take it, they want money, not a property title.

They WILL come after me for the deficiency, this is why I need a "deficiency fund" I want to pay the 80-100k deficiency as fast as possible. I am hoping they will accept a payment plan, otherwise I will have to go to court.

HSBC is not into settling with anybody, Furthermore they are notorious for sueing for deficiency even after accepting a short sale. They do this via a technicality on the docs.

I think since I go for foreclosure, it is actually more ethical staying in the property, abandoning it sounds more irresponsible to me...Abandoned properties get damaged so the bank will get even less for it and it affects the neigborhood prices as well...

Radiance · #14 (**permalink**) 07-24-2009, 01:21 PM

Actually I don't know how ethical is renting now with "good credit" on record knowing that it will be destroyed in a couple of months.

Morality is a weird thing. I have done some heavy praying and I am leaning towards staying on the house. It will empower me to actuallt pay everybody back, unsecured debt, car loan and the mortgage deficiency.

Who knows, maybe now that I will unfortunatelly be late the bank will turn around and approve hardship again. I did submit a letter of appeal to their decision as requested by them. I estimate that will have a response in 30 days.

I estimate I will be out of everything in 7 years. My son will be 8 by then, wow. Better then than later.

disneysteve · #15 (**permalink**) 07-24-2009, 02:10 PM

Quote:

Originally Posted by Radiance

Actually I don't know how ethical is renting now with "good credit" on record knowing that it will be destroyed in a couple of months.

I don't see an ethical problem with that at all. We all know that credit score is not the ultimate determinant of whether or not you can afford what you're doing. You could have a more than adequate income to cover the rent you are taking on but have a lousy credit score because your ex-spouse trashed your credit before getting divorced. Or maybe you had a medical crisis and couldn't work for a while.

As long as you are taking an apartment that you can comfortably afford given your income, I see nothing wrong with doing it now, while your credit is still good and you won't have to explain your whole story to the potential landlord.

graceful · #16 (**permalink**) 07-24-2009, 02:23 PM

Sorry I was confusing before.

My comments on what seemed more "ethical" was based on an assumption that the first 2 options involved moving out and surrendering possession back to the bank so that if they chose they could go into at anytime they wanted without going through the courts. But it doesn't look like that is feasible since they may not want possession.

You make a good point about not abandoning the house and leaving it a vacant shell. And like you stated, they may work with you later down the foreclosure time line but once you abandon the house, no more negotiation possible.

You need to do what is best for your situation. Personally, if my credit was going to be totally trashed anyway, I would probably stay in the house. I would worry about the school district MUCH later. Your son is young and you have time.

Radiance · #17 (**permalink**) 07-24-2009, 02:47 PM

It is very hard anyway it goes. I was very destroyed last night. But in talking to a friend and praying I feel much better. And posting here of course! I want and will pay everything back. Just not under the original conditions I signed for.

Aug 6th is coming soon, I need to make a decision well before that.
I keep on researching and I will get an appointment with a lawyer. If my friend doens't get back to me today iwth the name of one, I'll find another via yahoo yellow pages.

I bought a foreclosure book at nolo, it was very educational. Money well spent. (I took the money from my neccesities money) ;-)

In a nutshell it is about being very responsive to all comunications both from the lender and from the courts. I have done what they say to do. Contact a hud agency, get financial counseling, build a budget, cut corners, communicate with your lender, which I do weekly.

They might not like it much, but they receive a weekly phone call... I even recognize two voices that I know are bad karma and I hang up to call again and get another soul.

I am blessed my son is a baby, ok, a toddler, so he doesn't understand what is going on, he is not ashamed and I don't have to explain things to him. To him, Mommy is home...and to me, he is home.

Radiance · #18 (**permalink**) 07-27-2009, 07:22 AM

An update, I visited a couple of nice, well located places.

I was informed that they are not taking foreclosure into account. But if they see any other problems they decline to rent.
One of the places don't like it when they see luxury buys, such a trip or a new car together with a foreclosure. The other just want to see no other lates but the mortgage and the foreclosure.

So, I will be in good shape now or a year from now. Availability is tough though. I will have to look for a place well in advance.

...10 days left before I am late. No answer on my letter of appeal from the bank.
I have my appointment with a real state lawyer this evening.

Radiance · #19 (**permalink**) 07-27-2009, 08:21 AM

This really makes me think. When facing problems paying the mortgage, everybody advise pay the mortgage first and then the rest.

Given what I know now, I disagree, It seems that if I pay everything else but the mortgage, companies will be willing to ignore my foreclosure AS LONG AS I don't have other defaults.

If I follow the advise, I will get myself in more trouble than JUST the mortgage. I had refused to max out my credit cards in the name of keeping my house because I don't want a foreclosure AND tons of debt.

Besides, they tell you that if you stay rent free, use that time to save and get out of debt... THis is a huge contradiction to the advise of pay the mortgage first and the other creditors are less important or have less impact on your credit. It seems to me it is the other way around

creditcardfree · #20 (**permalink**) 07-27-2009, 08:47 AM

Quote:

Originally Posted by Radiance

This really makes me think. When facing problems paying the mortgage, everybody advise pay the mortgage first and then the rest.

Given what I know now, I disagree, It seems that if I pay everything else but the mortgage, companies will be willing to ignore my foreclosure AS LONG AS I don't have other defaults.

If I follow the advise, I will get myself in more trouble than JUST the mortgage. I had refused to max out my credit cards in the name of keeping my house because I don't want a foreclosure AND tons of debt.

Besides, they tell you that if you stay rent free, use that time to save and get out of debt... THis is a huge contradiction to the advise of pay the mortgage first and the other creditors are less important or have less impact on your credit. It seems to me it is the other way around

I understand whre you are coming from, but for someone who has the ability to pay their mortgage this really should be a priority. Shelter is a necessity. Of course, shelter comes in many forms and price ranges.

You have arrived to the point where you can't afford your home. You did make the right decision not to max out credit cards to afford your home. No one should ever do that.

I have heard that one should buy food first, pay utilities (water/gas/electric) and then housing.