| -> | | | | a car pool with a fellow worker who lived a half mile |
| The financing vehicles have been in place for several | | | | away. |
| years now for a borrower using some creativity with | | | | It was like the world had been lifted off their shoulders. |
| a seller to make 100% financing possible. However, the | | | | Now Harold and Laura had their rent, one car payment |
| real estate market had been so hot in many areas in | | | | and a small credit card and their home utilities. The cell |
| the U.S. the sellers did not have to even entertain | | | | phone service had gone by the way side many |
| anything resembling creative financing. With a softening | | | | months before. |
| market, creative financing is back as a helpful tool to | | | | Even through the most brutal times and the lowest of |
| allow sellers to unload their properties as long as an | | | | the low, Harold and Laura, as their custom, visited |
| over supply of inventory exists. | | | | Open Houses after church every Sunday. It was |
| Harold and Laura had been renting a home in a | | | | always in the neighborhood and never more than two |
| suburban area for three years. They had been digging | | | | home visitations. It was Harold and Laura's way to |
| out from under a heavy debt load of medical | | | | cope with the dark cloud that had beset them. During |
| collections. Laura was leaving work one day and a | | | | this process, they became familiar with a local Realtor |
| truck had crossed the line and pinned her in her small | | | | who took a very personal interest in their situation. The |
| car for a half an hour until the jaws-of-life was used to | | | | Realtor, named Betty, knew they were not ready to |
| extract her out from her crushed vehicle. With a | | | | do anything until some things had been handled. |
| broken hip, ankle, eye socket and fibula a long | | | | At the most recent Open House visit, Harold and |
| recovery ensured and Laura was not able to work for | | | | Laura shared that they had put their financial |
| two years. The other driver was at fault, but any | | | | challenges behind them. Laura was feeling great and |
| financial recovery was years down the road as the | | | | off all her pain medication. Betty raised the prospect |
| other insurance company was playing hardball. | | | | and questioned them if she could figure out a way to |
| In the meantime, with constant harassment for the out | | | | get them into a home at a little more than they were |
| standing medical bills and the weight of credit card and | | | | paying in rent with little or no money out of pocket, |
| installment debt that existed prior to the accident was | | | | would they have an interest at least in hearing more |
| just overwhelming. Harold had been working two jobs | | | | about it. Harold raised his hands with palms up and a |
| just to meet the basic family needs. Family help was | | | | shrug of the shoulders, and shared that it wouldn't hurt |
| limited and really wasn't expected. Laura's therapy had | | | | to listen to some possibilities. The accident had caused |
| been going on for a year now and real progress was | | | | a detour in the quest to own a home, but it had not |
| being made. Her employer had kept her job open as a | | | | killed their dream. |
| customer service representative ironically at a credit | | | | Betty set up a meeting with the Realtor's in-house |
| card service center. The benefits were limited and | | | | mortgage broker to discuss their options. A joint credit |
| very little of the medical bills and rehab had been | | | | report was pulled and as Harold at the time made the |
| covered. Harold and Laura had been seeking some | | | | most money his middle score was utilized to qualify for |
| financial advice from a local bankruptcy attorney. It | | | | a mortgage. His middle credit score was right at 500. |
| was decided that with their level of income and huge | | | | The mortgage broker went on to explain that they |
| medical bills that filing a Chapter 7 Bankruptcy action | | | | would qualify for an 85% Loan To Value mortgage. |
| might be the best thing to do for mental sanity and | | | | Due to their lack of a cash down payment, it was |
| cash flow. A Chapter 13-payback plan would be | | | | added, that the only way that they could use this loan |
| crippling for many years to come. | | | | option would be with a seller held second of 15% loan |
| As the bankruptcy attorney explained to Harold and | | | | to value with the seller also paying up to 6% of the |
| Laura that in his practice example after example | | | | contract selling price. |
| comes before him where just bad things happen to | | | | This would then give them a 100% Combined Loan To |
| good people and that there was no shame in taking | | | | Value (CLTV). The loan would need to be a Fully |
| care of their financial affairs in this manner. The | | | | Documented loan with verification for employment and |
| rationalization process followed. | | | | income. The mortgage broker felt like he could present |
| Two months before filing the bankruptcy, the insurance | | | | Laura's employment gap due to the accident and use |
| company was offering a small settlement based on an | | | | her current income for qualifying purposes. Totaling up |
| allegation that Laura may have temporarily been | | | | the income versus the debts, it was determined that |
| distracted by talking on her cell phone and thus | | | | Harold and Laura could buy a home in the $175,000 |
| reduced her reaction time. Rather than put up a long | | | | range IF the seller would offer reasonable terms on |
| protracted fight Harold and Laura, for better or worse | | | | the 2nd mortgage. Betty piped in that she had been |
| settled for an amount that just covered her payoff on | | | | sitting on a listing for six months and the owner now |
| her totaled car. They were relieved of that installment. | | | | may have an interest in holding some paper versus |
| Their attorney for the accident urged them not to | | | | renting the property again and deal with the tenant |
| settle, but with Laura's eminent recovery and the | | | | challenges on repairs and upkeep. The home was |
| stress of the whole ordeal, they grabbed what they | | | | close to their current residence. |
| could at the time. | | | | Betty was able to work out the deal with reasonable |
| Harold and Laura received their notice of the Final | | | | terms on the second mortgage that would keep the |
| Discharge of their Chapter 7 Bankruptcy. All the | | | | overall monthly payment down at least for the first |
| collections for medical bills, non-secured credit cards | | | | three years. As the mortgage broker explained, that |
| and one major medical bill that had resulted in a | | | | should be plenty of time to establish a better credit |
| judgement being awarded for the first responding | | | | history and qualify for a lower interest rate loan in two |
| hospital had all been wiped out. They excluded their | | | | years. As an added bonus, the seller agreed to pay all |
| family car from the Bankruptcy matrix (which names | | | | the closing costs and prepaid expenses such as |
| all the debtors), which still had a $6,850 balance with a | | | | annual hazard insurance and tax escrows plus |
| $295/month payment remaining. | | | | replacing a leaky roof. Harold and Laura moved into |
| They also excluded a credit card that they had for | | | | their newly purchased home putting all the travails of |
| years and had a low balance and a low monthly | | | | the past in the rear view mirror. |
| payment. This allowed Harold and Laura to maintain | | | | Sometimes bad things happen to good people. In this |
| two trade lines and their on time rental payment of | | | | current real estate market, there are creative |
| some $1,250/month outside the Bankruptcy action. | | | | possibilities. It won't last forever; the time is at hand for |
| Laura had now been back to work at her old job for | | | | seller help and creative financing. |
| two weeks. She was fortunate to take advantage of | | | | |