So, You Want To Buy a House, and You’re Not Credit-Worthy…
◊ I’d just turned 23 with 6,000 left over from my student loan, a bit of property education, no job, no assets, a crap credit score, no track record of borrowing credit, and lived at home with my Dad. How the heck could I get a mortgage to buy a property?
As you may have read in my “What happened when I bought my first property” post, no one would give me a mortgage or a credit card. Can’t say I blame them, given the description above.
Yes, I could get a job, get a salary and qualify for a mortgage, but f*** that. ONLY as a last resort. The very idea of a 9 to 5 job made me feel trapped and suppressed. Eurgh, someone dictating what you do, when you do it, five days a week!
My Dad tried to turn me into an employee once. We both agreed to never try it again. Some people thrive in a corporate environment. Other people run from it as if they were being chased by a horny rhino. I fall into the latter category.
If I wanted to buy my property without getting a job, I had to raise the money in cash. My fear of raising finance was overruled by my strong desire to not get a job.
*For anyone curious, I bought this property for £48,500. The surveyor valued it at £52,000. This means I got £3,500 worth of equity for free. Yay! Although I still had to pay legal fees and surveyor costs in order to purchase the property so if we minus those from the given equity, it works out as £2,000 in I gained in equity from this purchase.
I know some of you only go for 25 percent below market value (BMV), but you have to be more patient and persistent with sourcing if you want those types of deals in Coventry.
I can be persistent, but patience is not my forte…
Natwest’s minimum property value is £50,000 which is why they would not lend on the purchase but would lend on the refinance. Elite Legacy teach “You Make Your Money When You Buy” I am slowly starting to understand this sentence.
Here’s the breakdown of costs and stuff:
- Rent: £575 including bills
- The renovation cost £12,000 and pushed the property value up to £65,000
- I sent out a message on Facebook asking for investment at 6 per cent return
My initial exit strategy: Buy, renovate, then refinance on a joint mortgage with my Dad/anyone with a salary and good credit score.
As you will have concluded from reading the title of this blog, I did succeed in raising the total amount to purchase this property. Everyone received quarterly updates and was paid back on time with the agreed interest. Mission complete. Phew. Stress over.
As I found more deals I quickly realised:
1) I want to get good at this angel financing thing.
2) I want to learn how to do successful joint ventures with other people’s money
3) I want to figure out how I can make myself eligible for mortgages.
So that’s what I have done. It took a year and a half to learn and I am still learning. There were some very stressful, panicky times.
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Image Credits: Anthony Kelly.