Real estate financing under difficult conditions

Good day,

I registered in this forum because I hope to get help and advice regarding a possible real estate purchase.

About me: I am Kai, 40, from Ostwestfalen. Married with 2 children (8 & 5). I work as a skilled worker in the furniture industry, my wife is a call center agent. My income is about €2000 and my wife’s about €800 per month plus child benefits. That makes about €3200 household income. Both employment contracts are permanent.

The problem is: I went through insolvency proceedings due to a former self-employment; discharge of residual debt was granted last year on 23.6.20. My wife’s credit status is clean. A loan of about €160 per month runs for my wife’s car, otherwise no liabilities. Equity in my building savings contract is about €5000. Currently, we rent a 5-room apartment with garden etc. in a two-family house for €390 cold rent. If I use the usual calculators now, I could afford a loan of about €150,000 for a similar monthly burden. Here in rural Ostwestfalen, you get an older single-family house from the 50s-70s for that. So ideal properties for us.

Does anyone have any ideas how I can get real estate financing under these conditions? The usual realtors and house banks are cautious because of the insolvency. On the internet you also find sites for financing despite Schufa, but that seems untrustworthy or the interest rates are suspiciously high.

I already thank you for the help.

Best regards, Kai

Hi, first of all, welcome.

At the moment we are renting a 5-room apartment with a garden etc. in the two-family house for €390 total costs.

Why are you interested in ownership under these circumstances at all?
With such a rent, I would never move out. You already have a garden, you have enough space (or are all 5 rooms only 10 m² each).
So why change anything?

The usual brokers and house banks are cautious due to the insolvency proceedings. On the internet, you can also find pages for financing despite Schufa, but that seems dubious or the interest rates are ridiculously high.

1. With this background, seek an intensive discussion with the house banks. Otherwise, as a new customer, no one will probably want you - at least for financing. 2. Just keep your hands off all other offers if you don’t want to be taken for a ride or driven into the next insolvency.

If I now use the usual calculators, I could afford a loan of about €150,000 for a similar monthly burden. For that, you can get an older detached house from the 1950s-70s here in rural East Westphalia. So ideal properties for us.

And then? Houses of this age either have a renovation backlog of €100k and more. How are the renovations supposed to be paid for? From my point of view, the available income is unfortunately not sufficient.

Hello

Yes, why would someone want to buy a home despite relatively low rent? Simply because with that money you build wealth in the long term, also for our children, instead of paying someone else (our landlord) their retirement. Besides, you live alone in the house without anyone else. Our apartment isn't really big either, just under 100 sqm and the 5th room is a storage/office room on the lower floor next to our front door. Additionally, with a home of your own, I am more flexible, for example with an extension as a workshop. At the moment, I always have to work in my garage or garden when I build my own things or repair our cars etc.

I understand that you can’t get a new build for that money. Ultimately, it is a question of expectations. Generally, we are not very spoiled and can live with not entirely modern equipment. I am handy and other friends and family members are too, so I am not afraid of possible work on the house. The only thing I can’t do myself would be, for example, installing a new heating system or completely renewing the electrical system.

I can hardly imagine that the income is not enough. They say that up to one third of the household income is usual for the monthly payment. That would be over 1000€ for us, which would be possible. However, I don’t want to spend that much because I also want to travel in the future and have money in reserve for renovations. I don’t want to spend more than 500-600€ per month. Because that is what I could responsibly afford.

Best regards Kai

Are the 390 € cold rent? A house often costs a bit more additional costs than an apartment.

What’s important first is to get an overview of the condition of such houses up to 150000 euros. And don’t forget, there is the property transfer tax and possibly a real estate agent’s fee on top.