Jul 152023

After shoveling for a solid three years to get out of the debt hole they had created, Allen and Monica were making some progress. In a full effort to put their past credit history behind them there was still some nagging credit issues to get handled before they would be considered to have taken the full “cure”.

Weekend overtime, extra hours, daily overtime plus part time work resulted from the pact that Allen and Monica had made with each other three years ago. That every evening it seemed so hopeless. Laying out all the bills on the kitchen table and working a plan tied to a budget as laid out by one of the top radio financial specialist they made the commitment to turn their situation around. They agreed that bankruptcy was not an option they wanted to consider. They agreed and reaffirmed that they had made the debts and wanted to pay every penny. It seemed like a long time ago that the plan was put into play. So much had been missed but so much had been gained. Due to the distance that Allen and Monica had traveled, their credit scores had risen from below 500 to just over 580. Just six month ago in the then red hot real estate market, their efforts to buy a house were rebuffed by the “experts” who told them to rent another year and save 10% for a down payment. In the middle of their credit repayment plan, there was no way a requirement to save and put down $25,000 in cash and pay all the closing costs plus the escrow and reserves.

Like clockwork, every Sunday morning, after taking this one precious day to sleep in till 10:00 AM, Allen retrieved the morning paper and went through the sections carefully separating them for Monica until he found the real estate classified ads. This exercise acted as a means to keep their sanity and justify the brutal work schedules and personal denials necessary to stay on point and dig out of their deep financial hole. A part of their joint pact was to earnestly seek to buy a home so that they could start raising a family as a reward and the final payoff for their work out plan on the paying their heavy debts. Allen had done this so many times it seemed like a structured ritual. First the area of homes they wanted to live was noted. Next, the index finger of the left hand started moving down the columns with the blue pen at the ready in the other hand. Allen and Monica could now almost write the ads. This had gone on for the full three years. Allen didn’t really know what he was looking for but theorized that when he saw something he would know it. Allen and Monica had paid their rent on time for the last three years. They had paid $1,400 per month for the rent of a small home. At the completion of their pay back plan they would free up some $1,800 per month. They were just 10 months away from meeting their goal.

Allen and Monica had been reading the real estate market was softening but every time they spoke with a listing agent they seemed to be rigid and inflexible as if they were still living in the red-hot market that existed six months ago. Getting so close to their goal, Allen and Monica were getting pumped by getting so close to their eventual goal. They realized it was still going to be tough with little money available for a down payment but knew their monthly nut was going to down substantially with all their credit cards and installment debts would be wiped out. Allen and Monica, unlike many couples, had gotten even closer through their mutual sacrifice and in their “spare” time were developing an online business plan that they might rollout down the road when start up capital might be applied. The three years had prepared them to do careful planning and research to make sure they were on sound footing when they did not have to work weekends and second jobs. It was a labor of love and gave them both great options.

Allen’s left index finger was on it, but he couldn’t believe what he was reading in the ad. He flipped the front page over to make sure it was the correct date. It would have been a cruel joke. There it was an ad that said: “Got a job and can afford a reasonable payment-call now and start packing.” The agent gave his name, company and phone number and it closed with the statement: “Your creative real estate specialist with good or bad credit”. Allen quickly circled the ad and showed it to Monica. They looked at each other with big grins. Monica handed the phone to Allen knowing what the end game entailed. Allen called the “specialist” hoping it was true but anxious to find out if it was another dead end. Monica looked from across the room not wanting to hear yet another disappointment. Allen was on the phone with “Mr. Creative” for ten minutes. Allen and Monica had already determined that they needed three bedrooms, two baths, with a two- car garage in the area they had called and targeted. They had a budget established of a payment of $1,850/month made all possible with the debt reductions. Allen got off the phone and explained that “Mr. Creative” made a conference call with a mortgage broker and to determine what was possible. Allen and Monica had been monitoring their credit score and knew it first hand. They used this to keep track of their progress of credit debt payoffs. Allen got off the phone with a smile and told Monica, we’re going to look at a house. Monica was shocked. She couldn’t believe it. Monica asked Allen if he had told them all about their situation and the fact they had little money saved. Allen confirmed to Monica that he had and it was still a go.

As Allen and Monica rolled up to the home they were surprised that it had a lot of curb appeal but needed paint and landscaping. It was what they were looking for. They didn’t mind a little work. It would be a cakewalk compared to what they had been through the past few years. The mortgage broker was with “Mr. Creative” and remained in the kitchen as Allen and Monica slowly toured the home and began the mental game of imagining themselves in the home. As they came back to the kitchen Allen posed the question to the two knights, “Well, we like it, now what?” “Mr. Creative”, whose name as it turns out, was really Tommy and the mortgage broker’s name was Richard. Tommy, explained the owner’s had moved out of town and bought another house and needed to sell the home ASAP and was willing to do whatever was necessary to make it happen. It needed to be sold yesterday. Richard explained that with their credit situation they could get a 95% Loan To Value subprime loan which was 5 year fixed ARM loan with a 40 year term. The rate would be 8.25%.

Tommy chimed in that the taxes were $2,600 or $216.67/month and hazard insurance was being quoted at $2,350 or $195.83/month. Richard explained that with a current list price of $195,000 the 95% loan would be $1,322.94/month on $185,250.00 plus $216.67 in taxes and $195.83/mo. in hazard insurance for a total payment of $1,735.44 on the 95% portion. Tommy jumped in with the fact that the seller was willing to hold a 5% Loan To Value 2nd mortgage of some $195,000 x 5% = $9,750 which could be paid at $118.29 over a ten year period with a five year balloon at 8%. The total payment would then be $1,735.44 plus $118.29 on the second for a total debt service payment of $1,853.73/month which was within their budget and they felt like they could handle it. Richard further explained that Tommy had already worked it out with the seller to pay all the closing costs, prepaids and escrows so the Allen and Monica could walk into this situation with the price of an appraisal. The small savings they had plus a bonus would count for two months in housing reserves. Richard explained that this was a band aid loan with a five year clock and went on to reason by that time, they would be able to refinance and get a much lower rate with one loan. The comparable sales were about 10% higher and with a little fix up the price should be right up with the rest of the neighborhood. Allen and Monica were taken aback. They couldn’t believe that this whole thing was possible. After a 30-second discussion, they told Tommy and Richard to make it happen. Richard went on line and hooked up with a network connection and logged in the loan with input from the soon to be new homeowners. After 20 minutes, Richard had a prequal approval. In the meantime, Tommy was talking with the sellers and used his laptop to write up and offer on a writing tablet computer and e-mailed the offer to the sellers. With the verbal approval, Allen and Monica floated out the door not believing what just had transpired. They had banged on so many doors and none had opened, until today. This was a special Sunday where they found a Tommy, a Richard and a seller willing to help them even with challenged credit. All the stories are not on late night TV. It’s happening all around the country. Reach out and touch someone. This is a buyer’s market with great deals available. Buying cycles do not last forever. If in the market, act now.

Dale Rogers

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