Your Credit Score and Bank Account

90% of the largest U.S. banks use FICO scores. When you buy Real Estate, you will most likely seek a loan from a lending institution. Your FICO score is your credit rating. It's basically your Credit History Report Card and it follows you wherever you go.

On the low end of the FICO score range is 300 (bad credit falls between 300 - 600). On the high end, 850 would be perfect (excellent credit falls between 750 - 850). Average to good credit falls between 600 -750. Banks look at your FICO score to determine whether you are credit worthy. If your credit score is too low, you will be most likely declined for the loan. If your FICO score is high, you will not only qualify for the loan but will be rewarded with a lower interest rate. Lower interest rates can save you tens of thousands of dollars over the course of a loan.

FICO scores are calculated based on your rating in five general categories:
Payment history - 35%
Amounts owed - 30%
Length of credit history - 15%
New credit - 10%
Types of credit used - 10%

Lenders will give you preferred loan terms if your credit score is high. Good credit may qualify you for a low down payment, and if your score is in the 800's, they may not require a Down Payment at all. You can actually get a loan with NO INCOME VERIFICATION if your credit is outstanding. Excellent credit is the most powerful tool you'll have in the Real Estate game.

Have poor credit?......all is not lost, just fewer options. Sometimes, your credit score doesn't give an accurate picture of how responsible you are. Maybe you went through a divorce, and the Ex-spouse was the irresponsible one. Maybe you went through a health crisis, or a death in the family. Banks know bad things happen to good people. It is very important that you continue to pay your current bills on time and re-build your credit history if you want to be a success in Real Estate.

Money in the bank- If you're a good saver, you may offset your credit challenges with a substantial down payment. Lenders are primarily concerned with one thing when they loan you money........"Is the home worth more than we are lending you". If the answer is "yes", you have a good shot at securing a loan. People with average to poor credit, can expect to pay 20% of the purchase price. This gives the Lender a comfortable equity position in your property should you default on the loan. The more money you can put away in the bank each month, the greater your chances are to meet the down payment you'll have to pay to offset your less than perfect credit.

Why invest in Real Estate?

God isn't making any more land.....two-thirds of the earth is covered in water.....and our population is growing exponentially. How's that for an answer? Now that I have your attention, there are many more reasons why real estate will most likely be your single best investment you'll ever make. Lets look at one fact that makes a good case for making real estate your first investment choice. Did you know that every 15 years the cost of goods and services DOUBLE! Remember when gas was 30 cents a gallon in the 1970's, then 60 cents in the 1980's, $1.50 in the 1990's and now in 2007 we see prices over $3.00 a gallon. Whether it's College tuition, cars, or Real Estate, the doubling effect has been a fact of history.

Real Estate, however, has been known to double in 2 - 3 years in a seller's market. The strategy you must learn when buying your first piece of property is WHEN TO BUY. Learn this, and you will be quite successful. Fail to learn this, and you'll put yourself in the poor house. I will explain the strategy in greater detail in future postings.

In tomorrow's Blog, I'll get into how much money you'll need to start investing and how your credit score can save you thousands of dollars or cost you thousands when you're ready to buy.

Warning for new investors...beware!

Have you ever stayed up late and watched a Real Estate Info Commercial? There are many out there that guarantee you can buy property with no money down or bad credit. They often suck you in with promises of getting rich without using any of your own money. They'll then convince you to spend $300 on their Audio Cassettes or DVD that will show you how to achieve this remarkable feat. DON'T FALL FOR IT! They're in the business of separating you from your hard earned money. Most of the information in their literature isn't even relevant to the Real Estate laws in your state. What about the money back guarantee you say...These companies know that 95% of their buyers will never take the time and effort to send the tapes back. Shipping and Handling, (which is usually non-refundable), for those programs can exceed the cost to produce the Real Estate Guru's tapes (so he has already made a profit even with a refund......how do you like those apples?).


The point is, nothing worth having comes easy but with the right information you can succeed. In tomorrow's Blog, I will give you the first of many pieces of the puzzle that will help you successfully get your very first piece of Real Estate.

Welcome to the life of a Real Estate Investor

Wherever I go, I inevitably get into conversations with strangers about what I do for a living. Maybe it's the vehicle I drive, or that I'm working out in the Gym in the middle of the day, but the question will be asked, "What do you do?" After literally spending hundreds of hours over the years telling people what it is that I do and how I do it, I've decided to create this Blog to give people insight into the world of Real Estate Investing. I hope you, the reader, will find it educational, entertaining, enlightening, and useful in your quest to increase you net worth through Real Estate investing.