CHSI – A Bad Credit Alternative?

CHSI 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. 

Here’s basically how they work.

  1. You first pick a house out of their “inventory.”
  2. You then move in and pay CHSI rent. Lease terms range from 2-5 years.
  3. CHSI pays your property taxes and maintenance and also builds “lease credits” into the rent.
  4. 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.

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Call the company or consult their FAQs for facts and details.

  1. Wow, I actually had this idea about a year ago as a way to do investment property. Just rent to own a house, just like people can rent to own a couch at easy home or similar stores. Why do people always steal my good ideas? How are they reading my brain? I think I need a faraday shield around my head.
    I don’t find 1800 a month on a 149K house that out of the ordinary. Since they are also paying your property tax and maintenance. So in your example 100 for maintenance, 200 for tax, 1333 for a mortgage payment. Just that alone is 1633 . . . now of course in the first few years the mortgage would be through the company and probably much less than a 10% rate. I still don’t find it that outlandish for the ability to walk away after a while like rent, but also be able to buy. What happens after 2 years if you decide that this house just isn’t what your family needed, you could just walk.
    I think I found a new business…. try before you buy housing.
    Patent/Copy-write/Steal my idea and I break your legs Pending! ;)

  2. My guess is that CHSI is stocking their “inventory” with housing bought at way below market value. Therefore, allow a larger profit. Your example of $149k for the 884 sqft. townhouse was probably purchased by them for $110k!

  3. Hi Traciatim, Thanks to your always-entertaining posts, we promise not to steal your idea. However, very roughly speaking, you could probably save at least 10-15% a month by renting and saving for a downpayment yourself. Then you could apply your downpayment to any house, and not forfeit it if you don’t buy the one you’d been living in.

  4. I think the rent-to-own is a great idea. Part of the reason most people have a hard time collecting enough down payment is because they don’t have an investment strategy that can keep up with the housing market. For example, if your only investment strategy is to save money in a long-term deposit, then you may only earn 2-5%, which is barely enough to outpace inflation. In the meantime, the real estate market may appreciate 8-20% so you’re always further behind the following year. With the rent-to-own, you can accumulate equity faster while hedging the price of the property. Here is another site that seems to be following a similar strategy, but they are based in Vancouver: http://strategichousing.ca

  5. Another reason is that people just won’t save because they don’t have the dicipline.
    So I’ve amended my business . . . Rent-to-Invest apartments where you pay a little more but it automatically goes in to an investment account on your behalf. If you leave the apartment with an accepted home offer, you get the extra back for your home. Otherwise it just gets put back in to the ‘pool’ for the other people in the apartments.
    I wonder if people would go for something like this forced-saving through renting. It sure is a neat idea, I wish I had spare cash lying around to try it.

  6. Tony, Thanks for the comment and the link. The only thing I’d note is that historically Canadian residential real estate has appreciated much less than that. Going forward, most economists (like TD–see link) expect 3.5% to 4% appreciation for example.
    Traciatim, Your idea keeps getting better and better! Let’s find you an investor. :-)
    – Rob

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