How does your program work?
I get this question frequently, even though a brief, six-step process is spelled out on the website.
I have to keep it brief on the website, to keep visitors engaged. So, I thought a post with a bit more detail might be helpful for any who may be wondering about that (but were too afraid to ask, as the saying goes).
First of all, you apply to the program from the website. It is a simple application, without obligation, but gives me a bit of a picture of your situation and sets up a file for you. I or my colleague typically responds to the application with an email to set up a phone call within 48 hours. Unlike lenders, who simply ensure that you can tick off all their boxes, our approval is much more subjective, so the personal interaction is essential. Most of the further assessment cannot be done online.
If, after the phone call, it appears promising, we set up a face-to-face meeting where we go over all the details and determine together whether it is a good fit for your situation and for our model. If so, we sign up a 1-page “working agreement,” signing you up for the program.
Then, we connect you with our realtor and you look for a property within your maximum budget allowance. Subject to my approval, which is based mostly on whether it is a suitable property to succeed in our program, we negotiate to buy the property on your behalf.
In the buying process, we do up a Lease-Option Agreement that spells out all the terms of our deal, such as the monthly rent, rent credit amount, length of term, buy-out price, and other details. At that time, I collect an “Option fee”, typically 5% of the acquisition cost of the property. This secures your Option but, in the end, becomes the first 5% of your down payment.
During the term of the contract—usually two or three years–you simply rent from us, though we treat you more like homeowners. You look after the property, do the maintenance and minor repairs, and pay the utilities.
Rent typically has 2 components, the basic rent which pays our costs—and cannot be less than market value–and the “credit portion,” the amount needed to build your credit account from the initial 5% to 10% you will need for a down payment, plus closing costs. (In rare cases, we may anticipate you qualifying for a final 5% down payment commitment, in which case the initial deposit may be a little less and the monthly rent credit amounts lower, or the term shortened, accordingly.)
Credit coaching is an integral part of our program, and we coach you to build your credit to the level needed. Almost any credit can be restored within three years. However, it depends on your commitment to making that happen. We can only coach; you have to do what it takes to build it.
During the term, we do quarterly inspections of the property, and normally connect a credit coaching session with that visit.
At the end of the term, mortgage shortcomings now repaired, and you are now able to qualify for a mortgage, we help you get that mortgage and transfer the property to you. The credit account is sent directly to the lawyers involved to cover your down payment and closing costs.
The buyout price at the end will be at a modestly appreciated value, as that is where we make some money to put bread on our table, too. Since that number is written into the original contract, we both know what to aim for with the credit account, and there will be no surprises in the end.
If you fail to correct the issues, though, or abandon the effort, or for a variety of reasons have to withdraw from the process (like loss of job, relationship break-down, etc.), then you forfeit to us what has been accumulated in the credit account as our compensation for getting stuck with the property and having spent our time and effort in the process. However, our goal is for success; we do not accept clients unless we are very confident that they will succeed in the end.
The whole process is designed to be a win-win for everyone!