Question from a reader:
Hi there, Matt. I was wondering if you could give some advice as to how to get this ball rolling. I’m a full time college student, married, with about 10k saved up (both of us work minimum wage). I found a house that I am very interested in buying, and its currently under foreclosure for 59,800 (I have a couple back up properties if things go south with this one). We currently spend 400 a month on rent which comes out of our wages, plus 150 a month on utilities. I also have a car loan out (125.00/mo), which should be paid off by April. Is this even doable? Any suggestions? Thanks in advance!
Thanks for writing in. I have talked quite a bit on this blog about buying houses outside of traditional ways, not using banks or Realtors for instance. That said, buying a house without bank financing should be looked at as a secondary option and might not work well in this case. Reason being that since this is a foreclosure, it will probably be tough to directly contact the buyer and negotiate a deal with him or her.
Since you both have jobs, it’s possible that you could actually apply for and possibly be approved for a bank loan. I would recommend going to a small local bank or credit union to see if you can get a loan for this. You would be able to put down 10k theoretically which would lessen the bank’s risk considerably. Loan to value would be within their bounds as long as the appraisal comes in at a sufficiently high valuation.
So step one, go to a bank and apply for a loan. Bring them all of your financial information, just like you listed it here and make your case. Getting a bank loan is almost always better than a land contract since you will probably pay a lower interest rate.
If you get denied, try another credit union or small bank. If that still doesn’t work, see about trying to contact the owner and making a deal. I’m not familiar with the situation in your state but it’s possible that the owner still may have some degree of control of the property. If the house has gone through the whole foreclosure process then this obviously would not work.
One final thought … If this property has gone through the whole foreclosure process then it is not owned by whoever had the loan originally, probably a bank. See if you can contact them directly about buying the property and having them finance it.
Contact me if you have any more details on this. I would love it for you to get this property. It’s impressive that you are looking into buying a property while you’re in college. Very few folks out there even try this. Keep me posted!