If you can’t get a mortgage because you’re credit is bad, Creative Housing Solutions (CHSI) wants you to call them instead of a mortgage planner. The upstart company leases houses to people who can’t qualify for a traditional mortgage.
You then move in and pay CHSI rent. Lease terms range from 2-5 years.
CHSI pays your property taxes and maintenance and also builds “lease credits” into the rent.
At the end of your lease term you use their “lease” credits as a downpayment and buy the house; or, you walk away.
The upside is that qualifying with CHSI may be easier than getting a mortgage with many subprime lenders. In addition, CHSI’s lease credits are like a forced savings plan that let you build a downpayment over time.
A big downside, however, is the payment. Here’s an example property. Based on our calculations, this 884 sq. ft. townhouse is worth ~$149,000 and leases for $1800 a month.
In case it’s not obvious, $1800 a month for this home isn’t cheap. A mortgage on $149,000 is only $1333 a month at 10% interest–not out of the question for someone with bad credit. You could easily pay your own taxes and maintenance, put 15% of your payment away each month for a downpayment, and save the “juice” CHSI builds into their lease payments.
The other downside is CHSI’s limited home inventory. They had just one property in their southern Ontario listings as of this writing–and it was already leased.
In sum, given the above issues, those with “challenged” credit may be better served by calling a mortgage planner who specializes in subprime deals. If CHSI’s inventory and payments improve, however, their appeal may someday grow. We’ll keep an eye on them.