The good, the pad and the equity

Published 7:42 pm Friday, January 25, 2008

Most people would have taken one step into the south Everett condominium and backed out quickly, but Levi Carey could see potential — and a future investment.

The two-bedroom unit needed sweat and love, and Carey, a 22-year-old utility technician, set about scrubbing the place and replacing floors and painting until it felt like home.

Technically, Carey won’t own it for at least another year, but this place will be his if he makes the payments. He’s part of a nonprofit program that gives people just out of reach of homeownership a boost with a two-year lease-to-own program. He likes putting his money to work building equity, rather than throwing it away on rent, he said.

“I’ve always wanted to get a house, but I thought it would take longer,” said Carey, who heard about the program from his former landlord, Kyle Haven. “I don’t have to wait until I’m 25 or 30.”

This Edmonds-based nonprofit, called Home for Good, is one-of-a-kind, executive director Melanie Gillespie said. With the median house price in Snohomish County at $382,000, according to the most recent statistics from the Northwest Multiple Listing Service, it’s one way for people to get into a home. The county recently encouraged its 3,000 employees to consider the program, and in the last few weeks the organization has received about 100 inquiries. Home for Good also can help people on the brink of foreclosure avoid it.

Those who qualify choose a home and the nonprofit buys and leases it to them, usually for up to two years. Financial counselors meet monthly with people in the program, helping them learn about financial issues such as credit, mortgages and setting a budget. When they’re ready, the participants assume the loan and the house is theirs for the same price Home for Good paid for it. Participants pay a fee that amounts to 3.5 percent of the purchase price when they buy the house.

The program is ideal for people who could afford the mortgage payments but can’t qualify for a conventional mortgage because they haven’t worked long enough or they’ve had some kind of credit mishap after a divorce, a layoff or an illness, Gillespie said. The program also allows families who aren’t sure if they can handle the cost of home ownership a chance to try it out.

Carey didn’t have the work history to qualify for a conventional home loan. The program gives him some time to build up a good credit history so he can qualify to take over the mortgage on his $149,000 condo. When he does assume the loan, he’ll pay the same price for it the nonprofit did and all the money he has paid already will be applied to the mortgage.

If a family can’t for some reason make the payments, they can walk away without penalties or fees, Gillespie said. However, she said the program is set up to keep people from failing. For example, it does not allow someone to purchase a home they can’t afford, and it requires monthly meetings with a financial counselor. It offers only Fannie Mae-approved conventional 30- or 40-year fixed-rate mortgages.

This isn’t a good program for people mired in debt or for people who aren’t committed to home ownership, Gillespie said. The lease price is generally more expensive than paying rent. Financial counselors at Home for Good develop a plan for each household that will help them meet their goals, and they expect participants to stick to a budget and work to correct bad habits that pull down their credit score, such as not paying bills on time. And the participants are expected to keep up the property.

“When we are talking to people on the phone we make it clear this is hard work, and it’s entirely on them,” she said.

In order to qualify, household income cannot exceed 120 percent of the median income in the area, which is now $86,100. The majority of people who have applied to the program earn between 60 and 100 percent of the median income, she said.

Home for Good is relatively new. Darryl Lewis and Karim Khoury, business partners in real estate and development, came up with the idea years ago, and they ran a pilot program with six families that ended in 2006. All owned their homes by the end.

The founders provided most of the funding for the nonprofit, as well as office space and support staff, at the partners’ John L. Scott Real Estate office in Edmonds. The partners also have another office in Mill Creek. The nonprofit is applying for various grants, including one with Snohomish County.

The nonprofit wants to begin offering another program to help those who have gotten into a mortgage they can’t afford make a “controlled exit” that won’t devastate their credit scores and would keep them living in the same community, Gillespie said.

The nonprofit is making plans to expand the program to as many as 300 households in the next three years. At the moment they can work with anyone in the state, but Home for Good’s efforts are focused on the Puget Sound region.

Reporter Debra Smith: 425-339-3197 or dsmith@heraldnet.com.