When I was a young man the only thing I visualized was the car that I was going to be driving when and if I was ever old enough to drive. My dream car at that time was a 1956 Chevy convertible and to this date my dream hasn't come true as I visualized it. My first car was a 1950 ford, two door sedan, and my next car was a 1953 ford, two door coupe. My dream is still with me but now it would be a 1955 Chevy convertible or a 1956 Chevy Nomad wagon. The dream will never die and one day I will give it the energy to make it happen. Once I came of age, drinking and voting age of 21, the dream became one of a house of my own. At age 27 that dream came true with the purchase of a 3 bedroom, 2.5 bath, rustic house with a swimming pool which I bought for $37,000 without a penny of my own money in the purchase. The transaction wasn't pretty but I made it work. I have talked about that purchase in previous columns.
I was very fortunate in my early life. My father paid my $50 tuition per semester to get me through UCLA and I paid all the rest including my books, fraternity bill and room and board when I lived at the fraternity house. I worked three jobs, rowed on the crew team, played intramural football and basketball for my fraternity, went to school and simply enjoyed life. After college I got a job as a stock broker and worked my way through night school at USC to get an MBA in Finance. Getting a house just seemed to be the next step.
Not everyone is as lucky as I was yet getting a house is now available to anyone who has the burning desire to own one. We have a plethora of programs including 100% financing, which means zero down (not exactly the way I did the zero down) so that you can purchase a home of your own. You now need a 600 credit score for 100% financing which can put a number of people on the "do not apply" list because they are in the 500+ range and don't know how to create the opportunity of owning a home for themselves.
We can! We have a lease option program that is brand new and is nothing like the normal lease option programs of the past. The old lease option plans had you leasing a house and part of the monthly payment went toward the purchase price. If you were going to pay $400,000 for the house and had a monthly payment on the lease of $1600 then $250 a month went toward the $400,000 purchase price. In this manner it would take years to accumulate a meaningful down payment, but for many there wasn't a better alternative. But now there is one.
New lease option program takes a minimum of a year to qualify. If you have been renting or leasing a house or condominium for at least one year and have a set price to buy that was established a year or more ago, then you have all the ingredients needed to make this happen. When you are ready to execute the purchase contract the house will be appraised and if it has gone up in value the difference between the current value and your purchase price belongs to you. This is your down payment or if you can and want to qualify for 100% financing you can pull this cash out of the house when you buy it. Amazing, but true!
How can you make this work for you. Good negotiating will certainly help. Here are a few points that you can use to get the price discounted from the start:
1. No real estate commission which saves the seller up to 6%.
2. No time on the market while the property is for sale. You will be paying rent until you purchase the property.
3. No worry about the inspection as you will already know what is wrong with the property, if anything.
4. No negotiations with prospective buyers and their agents.
These points can mean dollars in your pocket and can help you get into the property even if your score doesn't reach 600 on your credit report. If you get the discounts you need your purchase could be 85% or 90% of the fair market value which you can qualify for with a score less than 600.
Your dream can be a reality in one year and you have the opportunity of not only getting a place of your own but increasing your net worth during the time you are waiting to close on your new place. Using a purchase price of $400,000 and your ability to get a 10% discount your purchase price will be $360,000. Even if the house or condominium doesn't appreciate during the year you still have gained $40,000 in equity which is yours. Should the house move up 5% in value during the lease period you now will have an additional $20,000 in equity.
Last but not least is what happens if the value of the house goes in the other direction during the lease period and your purchase price is higher than the value. One, you don't have to exercise the purchase contract or two you can renegotiate the contract with the seller because he is going to lose the sale and likely will not be able to sell it to someone else at a higher price. It appears that either way, the value going up or coming down, you are covered. Now it is your turn to go out and make it happen.
As in most things we covet or dream about in life they are generally available to us if we use our intellect and common sense and give the plan you develop the necessary massive action it will take to make it happen for yourself. I am sure your can do it and besides if anything comes up that you need help with I am just an email away. There is a home in your future and hopefully a Chevy in mine.