success rate of tenant-buyers repairing their bed credits in RTO deals
- Thread starter Joel
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I think that would be an impossible statistic to calculate. There are too many shoddy RTO companies (like the recent fiasco in Ontario) and therefore too many RTO tenants that should never be approved.
When we receive applications from people who have no hope of qualifying with a bank within 2 years, we give them a suggestion list of how to improve there credit and ask them to reapply in 6 - 12 months. Many people have no idea how to improve credit scores, so they thank us and often reapply later.
However, many RTO companies focus on the fact that option payments are non-refundable, and they may accept these applicants regardless of their credit situation.
Another reason that the statistic cannot be calculated is because there really is no way to track RTO's. The failures would not show up on the radar unless the failed client complained to the press or the BBB, and the successful ones may not show as RTO's because if the option payment was a lump sum (rather than monthly installments) some banks log it as a regular purchase with a really long closing.
When we receive applications from people who have no hope of qualifying with a bank within 2 years, we give them a suggestion list of how to improve there credit and ask them to reapply in 6 - 12 months. Many people have no idea how to improve credit scores, so they thank us and often reapply later.
However, many RTO companies focus on the fact that option payments are non-refundable, and they may accept these applicants regardless of their credit situation.
Another reason that the statistic cannot be calculated is because there really is no way to track RTO's. The failures would not show up on the radar unless the failed client complained to the press or the BBB, and the successful ones may not show as RTO's because if the option payment was a lump sum (rather than monthly installments) some banks log it as a regular purchase with a really long closing.
Hi Sherilynn,
I would be interested to see some of the ideas you present your clients in terms of cleaning up their credit. I would also be interested to learn how you have managed to help any of your clients secure purchase financing, and CMHC approval in situations where they might not save the requisite 20% down payments.
I own a couple of RTO properties at present. While the tenants have very good income, they might be able to use some advice on making sure they get their credit in order when it comes time to purchase.
Appreciate any suggestions you can offer.
I would be interested to see some of the ideas you present your clients in terms of cleaning up their credit. I would also be interested to learn how you have managed to help any of your clients secure purchase financing, and CMHC approval in situations where they might not save the requisite 20% down payments.
I own a couple of RTO properties at present. While the tenants have very good income, they might be able to use some advice on making sure they get their credit in order when it comes time to purchase.
Appreciate any suggestions you can offer.
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I refer my clients to a mortgage specialist with TD in Edmonton. She is able to work magic.
I believe there are two sources for her superpowers: 1) she is a mobile mortgage specialist working out of her home, so she only works on mortgages and doesn't have usual distractions one would find at a bank (like other customers); and 2) banks have leeway to make exceptions for clients, and bank staff can push for those exceptions, whereas brokers must fit everything into the box provided to them by the broker channel.
I have no doubt that there are some brokers that specialize in getting tricky cases approved, but I think having a banker on your side is helpful.
As for credit improvement strategies, one key is to keep balances on revolving credit lines and credit cards below 30% of the limit. If someone has a small limit (such as $500 or $1000) and must make a purchase of several hundred dollars, he should prepay the amount so that the % stays low. Even if people pay their balance in full every month, if their credit is pulled the day before the payment is processed, the score will be substantially lower.
I believe there are two sources for her superpowers: 1) she is a mobile mortgage specialist working out of her home, so she only works on mortgages and doesn't have usual distractions one would find at a bank (like other customers); and 2) banks have leeway to make exceptions for clients, and bank staff can push for those exceptions, whereas brokers must fit everything into the box provided to them by the broker channel.
I have no doubt that there are some brokers that specialize in getting tricky cases approved, but I think having a banker on your side is helpful.
As for credit improvement strategies, one key is to keep balances on revolving credit lines and credit cards below 30% of the limit. If someone has a small limit (such as $500 or $1000) and must make a purchase of several hundred dollars, he should prepay the amount so that the % stays low. Even if people pay their balance in full every month, if their credit is pulled the day before the payment is processed, the score will be substantially lower.