In addition to having good contracts terms (full price sale, decent down-payment, high monthly rent, etc), we also did the following due diligence:
- We had the buyers talk to our mortgage broker. What we found out was that their issue wasn’t so much bad credit as it is no credit. In fact, they only had two credit scores. The buyers are in their late 30’s or early 40’s, but apparently have never even had a credit card. Our broker thought that they were serious about wanting to buy, and got the impression that they’d do whatever was needed to get their credit into shape to get approved for an FHA loan. Additionally, the buyers agreed to credit counseling to continually help them improve their credit.
- We met the buyers this evening at their current house. They were extremely friendly, sincere, and are exceptionally excited about the prospect of being able to buy our house one day soon. Their house was very clean, well-maintained, and while they had a lot of “stuff”, the fact that they don’t even have a credit card indicates that they don’t overspend to any unreasonable degree. The impression we got was that they would work hard to qualify for the loan as soon as possible, and the money they are risking attests to that fact.
Our mortgage broker believes that they should be able to qualify within 6 months, perhaps even sooner. The contract we signed is a 5-month lease purchase starting April 1, hopefully culminating in a purchase no later than August 31. As we told the buyers, if they don’t qualify by August 31, and are making a sincere effort to improve their credit, we’ll give them more time (we’ll also be making a good monthly income in that time, so it’s a win/win).
We signed the contract tonight, and the buyers now have 10 days due diligence to get the house inspected and decide if they want to move forward. I’ll have more to say next week when we get closer to the end of the due diligence period…