From Ruin To Fortune

From Ruin to Fortune:
One young ladies’ financial odyssey.

 

Today the financial and mortgage industry is in a tizzy. Everyone is speculating just what is going to happen with banks, mortgages and the economy. Are we in recession? Is the financial base of the USA in danger? Is there any way for the common person to get ahead?

The answer is YES! With the right knowledge, a bit of discipline and a unique approach to debt almost anyone can be debt free, own their home free and clear and still have a life style while doing it. 

The following story is one young ladies odyssey from debt, bankruptcy, and life changes and back to a strong financial future in just a few years!

Is she a financial wizard? Some type of money expert?  No, rather she is a determined young woman that would not accept setbacks or settle for financial mediocrity.

 

Here is her story, in her own words:

 It was July of 2004; my husband Rob and I had just lost our restaurant that we had owned for five years.  We had purchased the restaurant with a contract for deed and also took on considerable old debt.  This debt load was a large Albatross around our neck, continually dragging us down.  If only we could have had a way to reduce the debt or at least the interest cost we might have made a success of the business.

We were forced into both personal and corporate bankruptcy.  Then to top it off we were also told to leave our apartment which was located on the second floor just over our restaurant.  We were dead broke with no place to live!

With three children in tow, one an infant, we begin to look for new living accommodations.  An acquaintance of ours told us about a friend of his that had a larger home for rent.  The house was a big enough for our family with 5 bedrooms and 3 bathrooms; the only issue was that the rent was $850.00 per month.  Although the money was not in our pockets, we decided to take the risk and move the family into the home.

Of course, both Rob and I went looking for employment.  Being a great cook; Rob landed a decent position for a new franchise restaurant; I took on a commissioned sales position in the furniture business. 

As time went on it was obvious that I was not making enough money to pay the bills, much less the daycare costs.  At that point it was decided to take another big risk for the good of our family; I stayed home and opened an in-home childcare.  This was the best thing I could have ever done, financially and mentally. The change improved our family situation and not having to pay day care was a big load removed from the budget. This improved our financial picture and we started to think about purchasing the house from the landlord.  This was in the fall of 2006. 
Our large 5 bedroom and 3 bathroom house was in disrepair and it needed a lot of work, a new roof, better siding, more insulation, new windows and plumbing. Unfortunately, the landlord was not interested in fixing it up in any way.  So, after a little persuasion and showing him what he would have to do to the property, he agreed to sell us the house.  We went through the process of getting the property appraised and after a little bit of back and forth negotiating, we mutually agreed on a price.  This is when the real roller coaster started! 
I had started to look for financing in the usual ways. I talked to a local mortgage company and to my bank; they both turned me down due to my husband’s credit and we still had a few big bills left over from the restaurant. Everyone that I had spoken to said the best way to purchase the house was to do a contract for deed.  After much debate, my husband and I decided to ask the landlord what he thought of the idea.  It was now the winter of 2006. 

The landlord had agreed to do the contract for deed; unfortunately he wanted a 10% down payment. We asked him to give us a few weeks to get everything in order.  When we had all of our ducks in a row we called the landlord and asked when he could have the paperwork ready.  He stated that he didn’t know but would call us when he was ready.  This was now the spring of 2007. 
After many phone calls and conversations the landlord finally showed up with all the papers in September of 2007; only 6 months late.   Three years after closing the restaurant and being dead broke, we had our own house; the feeling was fantastic, maybe we could finally make it financially!

We also knew we had to refinance the house as soon as possible due to the repairs that it needed and because the mortgage payment was $700.00.  With the remaining debt from the restaurant; the payments were tough on us and we now had to pay for any of the repairs ourselves.  Also, if we could get a mortgage placed on our credit reports, it would help to improve our scores dramatically and allow us even more flexibility with any future ventures. 

In November of 2007 we started to speak to another local mortgage company whom we thought could get everything done quickly.  After all of the initial approvals and paperwork we found out that we had to have an additional 5% down sitting in a savings account to get seasoned (bank talk for we didn’t spend every dime we had.) and cover all of the closing costs.  Frustrated and discouraged, we again waited patiently for the next 3 months to go by. 
That was when my father started to tell us about the Accelerator program. He indicated if this had been in place a few years before he could have saved up to $20,000 - $30,000 or more in interest costs in just one year and possibly kept a new business open. 
I had watched a video, read some material and watched another video. To get the concept I had to rethink what I understood about how money works. Unfortunately Rob did not seem to really understand it at all. 

 
 
 
In reality I did not really understand the power of what this approach could do in building wealth. We ran numbers through the simulator and it paid things off fast, yet I’m not sure it all sunk in.

 

What I did see is with this program and the fiscal responsibly I had learned over the last three years;(raised my credit score 300 points) we would be able to fix up the house, add a garage, hot tub, and landscape and still have my house completely paid off in 10 years or less!

 

 
 
 
The key to how this Accelerator works is how it slashes the cost of money by 2/3 -3/4 of what it could be.  Once we researched and finally understood the “cost of money” concept it really made sense to me.  Most people do not realize that nearly all 30-year mortgages actually more than double your debt load!

 

 

This change in our finances and available cash flow would also mean I could start to dabble in real estate and maybe flip a house or two. Even when we bought the restaurant, my real goal was to own the property and develop it. In other words I could follow my dream and be financially independent before I was 40.

 

The only problem was that the Accelerator product we were researching had to have a minimum appraisal of $100,000.00 and the house was only worth $97,000.00.  The Accelerator also required a very high FICO score and significant proof of income.  Being that I was self-employed meant using a stated income and using a stated income makes it tough to get credit, even with high-risk loans.

 

Frustrated with all the set backs and always falling just short of qualifying, I decided to just get a regular 15-year mortgage and a 5-year second mortgage credit line.  Even if it meant that I would have to pay a higher interest rate, $75,000.00 in interest and the mortgage of $80,000.00, and still have the restaurant debt to pay off. You see, the extra equity we could pull out from refinancing could eliminate the remaining restaurant debt. This would mean cutting the interest and penalties that were being added as well as the letters and calls.  It was not what I wanted and it was not getting me to my goals, but we felt the need to move forward somehow.

 

Then, in March of 2008 my father and business associate, Mike had figured out how to do the Accelerator with a local bank.  They called this educational program The Credit Revolution program; dad always believed if you pay for it you’d use it so I purchased the program and did my due diligence on learning the strategies it offered.

 

I purchased my membership to The Credit Revolution course; I was directed to find a bank that would do a HELOC (Home Equity Line Of Credit). This should be for the entire appraised value (100%) or at least 80% of the homes appraised value
with a daily interest rate and have an attached swept checking account.

 

 

 

Armed with this new information I started to call around; I asked my bank but they would not do the daily interest rate.  They would however do a monthly interest rate. The loan officer just could not understand why I wanted the daily interest rate even after I had explained in detail The Credit Revolution and how it worked.

What was really interesting is how closed minded many of the bankers seemed. “Why would you do this?” “That is not a standard product; you need to use a regular mortgage.” “No one can alter their credit score 300 points in a year!” “That will never work and it’s too risky! What if you max out the credit line, then what?” There were even more, it took sorting out and finding the open minded ones in order to get it done.
Then I called another local mortgage broker who understood what I was trying to accomplish and was even considering this strategy for himself.  He tried though a major bank but they had wanted me to hold a true mortgage for at least a year. (Seasoned comment from before). Unfortunately my landlord had not registered the contract for deed so there was no record of us owning the property for the past 6 months.  If the deed had been registered we might have had enough history to get the loan through.
 
 

 

 

With a little bit of discussion with Rob; we decided to try a few more of the smaller banks in town.  After 4 banks, 3 mortgage brokers, and a lot of frustration explaining over-and-over the idea using a HELOC and how it gave me so much flexibility and freedom; I found a bank that will do exactly what I wanted. Her comment was, “We do this all the time for business accounts, I just never thought about doing a home mortgage this way!”
 
 

 

 

I did have to explain why I wanted a HELOC with a daily interest rate and show the loan officer the flexibility it would provide. By helping her understand how I could be debt free in 6 years or less with less risk, she got it.  The only drawback I have found is that I will have to refinance the HELOC in 5 years. The bank will only let me draw from the account for that long.  However, this also allows us to increase the HELOC to the new increased value of the property at that time, possibly even to 100 or 120% of the appraised value!  We will be closing on the HELOC in 15 days and my new roof will be going up 15 days after that.  This is now April of 2008, just short of 4 years after being dead broke.

 

By the way, when Rob worked the spreadsheet calculator that comes with The Credit Revolution and he GOT IT!

I truly appreciate the information received in The Credit Revolution program; those tools gave me a leg up in speaking with the loan officers and I was able to talk their language right from the start.  The information also educated me on how the banker looks at loans and what they need to see and hear to get the loan accomplished.  The bankers I spoke with were very surprised at how much I understood about banking and mortgages. It’s not often a 5’ 4”, 100 pound 28 year old girl with no college education can baffle a banker.
 
 

 

 

With The Credit Revolution education program we also received the spreadsheets that helped us calculate the debt payback.  With the cars, credit cards, restaurant debts, house, house improvements and maintaining our current life style we will be fully debt free within six; yes, six years!

 

That represents $150,000.00 of debt paid to zero in 6 years on a combined income of $40,000.00! Remember we have three children as well with braces, school clothes, activities etc.

 

What we really like about financing this way is the flexibility it gives us. Yes we can be completely debt free in 6 years if we choose to. We can also use controlled leverage and buy properties without going to the bank every time. Our home becomes are investment bank! Now for the neat part of this, we do not have to change our life style or go without to do this!

 

Please do not give up your own dream of owning your own home!  It can be frustrating at times but it is worth it in the end. At 18 I bought a restaurant with out money. At 22 I married into a family with 5 stepchildren. Then at the age of 25 I had a child of my own, lost a restaurant and had to complete start over financially.  Today I will finally own my own house at 28 and will be debt free before I am 35.  In addition, I will be able to build a strong net worth before I am 40; it is worth the time and frustration.

 

The Credit Revolution has proven to be a valuable tool in helping me reach my goals.  Even though it seemed impossible a couple years ago, those goals are now all but a reality!

 

If I could do it, so can you!

 

 

To your future success,

 

Elyzabeth Goerger-Wendt