Our Home Purchase Arrangement

We have been lucky enough to stumble onto something that we could not possibly have anticipated. Just five months after being discharged in bankruptcy, my wife and I will be moving into our very own home. It is a highly unusual situation the details of which I can only briefly discuss at this time.

My wife originally found the listing and quickly became very interested in the house. I spoke with the seller by phone and explained to my wife that I wasn't sure it was the right time or the right situation for us to buy. I told her that if something like this seemed too good to be true, it probably was. She emailed the seller and explained to her that we felt the timing might not be right and that we would have to pass for the time being.

The seller replied to my wife by email with some very encouraging, enlightening information. My wife and I discussed the situation further, prayed on it together, and told the seller that we had reconsidered and would at least see the home. We made our first trip to the home on the Saturday after Thanksgiving.

When we pulled up to the home, we were both pleasantly pleased with what we saw. The home is in beautiful condition, in a very nice subdivision, on a corner lot with a pond behind it. When the seller met us at the door, we were again pleasantly surprised. The seller was not what we had expected at all. And he had his wife with him (I should mention that the home was for sale by owner, and the owner is an investor). And again, when we entered the home, we were even more pleased. I later told my wife that, upon entering the home, I immediately had the feeling that it could be "Home" for us. I haven't had that kind of feeling since moving out of the home I grew up in.

We toured the house:

• 2200 square feet on a quarter acre lot
• Four bedrooms
• Two and a half baths
• A large walk-in closet off the master bath
• A two car attached garage
• A large bonus room over the garage, accessible from within the house
• A formal living room with fireplace
• A family room
• A dining room
• A breakfast nook off the kitchen
• A laundry/utility room that passed into the garage
• Plenty of closet space

We were both thrilled with the home and all that it offered, and felt very comfortable speaking with the seller and his wife.

While my wife spoke with the seller's wife and my kids explored throughout the house, I talked business with the seller. I was completely open with him about our situation -- the recency of our bankruptcy and what led up to it, where we stood on making a down-payment and closing costs, everything that I could think of that might impact our ability to purchase the home and/or his willingness to sell to us.

We concluded our conversation by telling the seller that we were very interested in purchasing the home, and leaving with all of the paperwork we would need to complete in order to facilitate the purchase.

We completed all the paperwork over the weekend and emailed it to the seller. I spoke with a lender and a mortgage broker on the following Monday. I was surprised to learn a couple of things:

• My credit score is actually pretty high considering the recency of our bankruptcy
• Our attorney did a very thorough job (much of it due to the information we provided) of capturing and recording our debt in the filing
• It was very possible that we would be able to secure a mortgage in six to eight months

Six to eight months, however, would be too far into the future to purchase this particular home. But we didn't despair. The seller had mentioned in the past that he was willing to agree to a lease-to-own arrangement if we couldn't obtain a mortgage at the time.

This is where the story becomes even more amazing. Without detailing all of the events in the process, let me say that this particular seller has been unbelieveable to work with. As we dealt with him very openly, he was been very open with us, as well. He told us that he had three other interested parties: two investors and a person who wanted to open a daycare in the home. As the subdivision's covenant does not allow for businesses to be operated from within the home, that cut the considerations down to two.

Clearly, the seller could choose between dealing with our difficult situation, or closing a quick sale with one of the two interested investors. He could probably have even worked out a reasonable price with one of the investors to make it worth his while. Instead, he chose to sell to us. As shocking as that might sound, the deal has already been done.

And there's more. We will be moving into the home soon on a one-year lease. During that one year, we will be earning rent rebates toward a down payment on the home. We have no security deposit to pay, and the lease will include a one year home warranty that will cover the entire property with only a fifty dollar deductible toward any necessary repairs. In approximately eight months we will attempt to secure a mortgage again, working with the same mortgage broker that helped us at first. In order to facilitate the mortgage and make us more credit-worthy, we will be securing the services of a credit repair agency (more on that in a moment), as well as opening a couple of lines of credit to contribute to raising our credit score. The seller will also report our timely payment of the rent to the credit bureaus to positively impact our credit score.

While I don't normally believe that a credit repair agency is the best way to go -- because a determined person can achieve the same results as an agency for virtually no cost -- I have agreed to such terms because it provides assurance to the seller that we are taking the steps necessary to make ourselves worthy of a mortgage in the timeframe desired. The credit repair agency could cost us anywhere from $400 to $700, but the seller will know that we are as serious about home ownership as we portray ourselves to be, and it's a small cost to pay considering all of the concessions he is making to work with us.

At the time of securing a mortgage at some point over the next year, the seller will provide to us a rent rebate that will satisfy a substantial portion of the required down payment. He will then assist with closing costs and the remainder of the down payment. We will then become true homeowners.

So, all of this sounds too good to be true, right? I know. And much of it has been cause for long and serious consideration, and lots of prayer. My wife and I both feel that this is what God is leading us to do, and we feel that he has simply blessed us with a situation that is making it possible.

The seller isn't losing any money in the deal. He'll be making over $14,000 in rent over the period of the one year lease (before rent rebate). He will then be selling the home for approximately 94% of it's appraised value. There are certainly some tax advantages for him, and he has rented the property for the past two years for a total of over $30,000 in rent. While he isn't losing money in the deal, he is certainly making less than he could.

Now, I know that the skeptical reader might say that we're being taken. I can understand how one might have that point of view. But from where I stand, and with what my wife and I have said to each other, and with what I feel that God is telling us, I truly believe that this too-good-to-be-true situation is a gift from God. Only time will tell, for the skeptical, which is why you'll just have to keep checking back for updates.

Mortgage Update, And More

As I mentioned recently, my wife and I have decided to try to purchase our first home. This, of course, is an unusual thing so early out of Bankruptcy. We are learning that most lenders want you to be anywhere from one to three years AFTER Bankruptcy before they'll take a chance on a home loan.

We've spoken with one lender and one mortgage broker (sort of a lending agent who takes your credit info and shops around to see if he can find a lender willing to take a chance on you). The first lender was with Wells Fargo, and she was unwilling to take a chance on us so soon after discharge. She said that we didn't really need to worry about establishing any new credit at this time, but to just allow some time to pass before borrowing.

The mortgage broker gave us a different story. He said that our credit score actually isn't bad for being so early after Bankruptcy (more on that later). He said that the biggest concern he had was that we have not yet worked to reestablish our credit by opening a few new lines of credit (more on that later, too). He actually said that he felt he could get us signed up for a mortgage in six to eight months if we establish a couple new lines of credit and keep them current.

This mortgage broker actually provided us, free of charge, with a copy of the credit report that he ordered. He reviewed a couple things on the report with me that concerned him and referred me to a credit repair agency that can help me to correct them. Namely, there was a loan for the car that I surrendered back to the lender still reported on our report as open. This loan was indeed filed with the Bankruptcy and should show up as discharged. I contacted the lender and they claim that it is showing as paid off on their end, and that the error is with the credit bureaus. There was also a credit card still on the report as open that should appear as discharged. There is a prior auto loan on the report that was paid in full that still shows up as open. And then there's an item showing as open that I have never seen before. So I have four items on my credit report that need attention that are pulling down my credit score. I would not have known this without seeing my credit report.

Our attorney, as good as he was, never suggested that we pull our credit report again after the bankruptcy and review it for accuracy. You cannot sit still and just assume that everything will be correct on your report after your bankruptcy has been discharged. That is the most important time to become actively involved in ensuring that your credit report is 100% accurate and that you are taking the necessary steps to rebuild your credit. Again, this is something that our attorney did not tell us. Coming straight from bankruptcy, it's natural to think, "I'm never going to get a credit card again." However, that is exactly what you need to get -- get a credit card. One or two of them, three at the most. You get them, you use each one of them once, then you pay them off in full immediately. This will show them as active open lines of credit that will continually be reported as current, causing your credit score to increase.

The mortgage broker I spoke with actually suggested that I get a credit card, use it to pay the utility bill, then send full payment immediately to the credit card company. With most cards, if you pay it in full immediately you will incur no finance charges or interest. And since your just sending the money to the credit card company instead of the utility company, you aren't actually spending any extra money. He suggested we do this with two or three credit cards as soon as possible.

Bottom line is, it doesn't look like we are going to find anyone to finance us so soon on our home loan. What we did find, however, is a seller who is very much interested in helping people to realize their dream of home ownership, very interested in helping people in situations like ours to rebuild their credit, and very patient and flexible. He still has a plan to get us into this beautiful home that we have come to want so badly. We are currently working on a lease-to-own option that will allow us to sign a one year lease for the home, during which time we will open a few credit card accounts to increase our credit score, work with a credit repair agency and the credit bureaus to correct the errors on our credit report, and save up the necessary money for our down payment to purchase the home a year from now. At that time, we will once again contact the same mortgage broker, who we will stay in touch with throughout the year, and ask him to honor his word and get us financed for our first home.

So it looks like we will be moving very shortly into our very first home -- the first home that we will actually be able to call our own. Much closer to work. In a very nice community, with a very nice school district. And with all of the room we could possibly need until the kids are grown and move out.

So don't let yourself fall into the do-nothing trap that is so easy to fall into after a bankruptcy has been discharged. You must get active and make sure that your credit report is indeed correct, and take the steps necessary to begin rebuilding your credit. But open those credit card accounts with caution. Contact your bank first and see what they can do for you. Try to avoid secured credit cards and annual fees, if possible (I'll report on this as soon as we see what options are available to us). And, most importantly, DON'T spend any moeny that you don't have yet. Pay ONE bill with your credit card -- one bill that you would otherwise pay with cash or a check -- then send that same cash or check to the credit card company to pay it in full.

Be smart. Be aware. And be credit-worthy once again.