Ronald was a young twenty-something, who had
worked in a factory as his first job
out of High School. He loved his job and he
did very well for himself. The problem
was, Ronald had very frivolous spending
habits and wasn't educated well in regards
to consumer credit.
Ronald racked up close to $40,000 in debt,
which consisted of multiple car loans, a
motorcycle loan, and credit cards. He was
able to manage only the minimum payments of
these debt obligations for a short period of
time before he eventually declared
bankruptcy.
Two years following his bankruptcy and with
a clean slate, he thought about buying a
house. He had grown more mature and had a
better handle on his finances. However,
his FICO score which was once 690 had
dropped to 580 as a result of the bankruptcy
on his credit record.
There wasn't a lender in town that would
provide Ronald with a mortgage loan. They
all gave him the same answer, which was,
"take some time to rebuild your credit and
then come see me again".
After contacting Schwaps, Ronald learned
that there were still housing options
available to him regardless of his credit
score.
What Schwaps suggested was a "Lease with
Option to Purchase" (Lease/Option). In a
Lease/Option arrangement, Ronald would start
out with a Lease on a property and
after a agreed amount of time, he would have
the 'option' (not obligation) to
purchase the property. With this
arrangement, Ronald could get his feet wet
with
the property and "test drive" it before
buying it. The period of the lease, would
also give him time to re-build his credit.
Ronald ended up in a 2-year Lease/Option on
a 2 bedroom/1 bathroom property, valued at
$115,000, located on Kirby. The Option
consideration was $3,000. The Lease security
deposit was $1,000. The monthly lease payment
was $800, with a $300/month credit going
towards the purchase price if the option was
exercised. The purchase price of the house
was decided based on a 5% appreciation per
year for two years, or $126,788.
After two years, Ronald decided to buy the
house. The price of the home was
$126,788 minus the Option consideration of
$3,000 minus the $7,200 in rent credits
($300 x 24 months) which equaled $116,588.
The option and rent credits, combined with
an actual 9% appreciation in his
neighborhood yielded ($136,632 - $116,588)
$20,044 in equity upon purchase.
* The
story above is just one example of the many
ways Schwaps may serve your Real Estate
Needs |