People are saying that mortgage loans are hard to come by, but that’s not true in all cases. Those with excellent credit and a reasonable income can still get a loan from a mortgage company or a bank. People with not-so-good credit are discovering that finding mortgage money can be a problem.

For those with less than stellar credit but with average or higher incomes who want to take advantage of the lower priced properties that have flooded the housing market, the answer may be finding an Angel. An Angel is an individual investor, usually with cash to lend to home buyers or someone who has a preferred rate with a bank. Sometimes the Angel is a friend or relative, but there are professional Angels as well. This is how the angel system works:

Let’s say that a distressed property is selling for $60,000 but the estimated worth, once fixed up, is $150,000. The needed repairs cost $20,000. Add the cost of the house to the repairs and you’ll need $80,000, an amount which comes out of the Angel’s pocket when he buys and fixes up the house.

Meanwhile, the hopeful buyer (we’ll call him ‘Bob’) rents the home from the Angel for $800 per month (1% of the cost of the house) for six months to a year as he cleans up his credit. (Remember this won’t work unless Bob has a good income and is willing to work to raise his credit score.)

After the six months (or more) have passed, Bob the Renter can become Bob the Homeowner with his improved credit score and a mortgage loan from a bank or mortgage lending company. The house is now fixed up and worth about $150,000, but Bob buys it for $100,000 from the Angel. The Angel now has $100,000 in cash from the home sale (a 20% profit on his investment) and Bob has a $150,000 home for which he paid only $100,000.

While not everyone has a friend or a relative who can help in this way, many mortgage brokers have contacts with Angels. Of course, any buyer who decides to use an Angel should be sure to understand how this system works, be willing to sign a promise to buy the home even while still a renter and must work to improve his credit score so that when the time comes, he can get a mortgage.

As with everything, there are risks, but for some, an Angel may be the answer to how to afford to buy a home. This scenario is only an example and every situation is different. Before making a commitment, talk to your real estate agent , loan officer or a real estate attorney to decide if an Angel is right for you and your circumstances.

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If you would like to see any of the homes listed in the Minneapolis area, contact me, Chris Prescott, at (952) 944-1728 or email me .

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