In the post-housing crash world, Kelly and Jeff Clark are the kind of people who are not supposed to be able to buy a house.
For a down payment, they had exactly nothing. Their credit scores were sub-par. But this Christmas, the Clarks will move from their rundown rental into a brand new, four-bedroom home in an amenity-loaded development outside of Lakeland, Fla. All without paying a dime.
The Clarks were able to qualify for a mortgage because their builder, Southern Homes, spent the summer putting them through a financial boot camp. Bigger home builders such as D.R. Horton Inc., Lennar Corp. and PulteGroup Inc. are also offering sophisticated financial advice to prospective home buyers who would not normally qualify for loans.
These fiscal rehabs are one reason many builders are boosting sales, even though mortgage lending is tight. Pulte said in July that its financial program could help its sales for some time. On Monday, Lennar said revenue from home sales rose 33 per cent last quarter from the same quarter a year earlier. Orders for homes rose 44 per cent, helped by the 25-per-cent increase in membership in its Homebuyers Club since last year.
Providing financial therapy solves a huge problem for the builders: How to sell to first-time home buyers when so many younger consumers are saddled with student debt and bad credit.
The financial advisers go by names such as "mortgage advisers," "credit advocates" or "loan officers." They help prospective customers create budgets and slash spending. Both D.R. Horton and Lennar also help out with "credit repair," the practice of analyzing credit reports to determine the best strategies for raising scores as quickly as possible.
The buyers then get mortgages from the builders' own, in-house lending arms.
But consumer advocates say there is an obvious conflict when doling out financial advice. Instead of helping prospective customers maximize wealth, advocates say builders' advisers could be trying to suck as much money as possible out of buyers' pockets.
"What it does is create a captive consumer where the builder can charge a lot more," said Douglas Miller, executive director of Consumer Advocates in American Real Estate, a non-profit.
Home builders are often helping buyers get government-backed loans that require no down payment, or a low down payment, so taxpayers could be on the hook if buyers can't repay their mortgages. Some consumer experts fear that, just five years after the biggest housing meltdown in generations, builders are up to their old tricks again.
"You have people applying for loans that there's no way they can pay, but it doesn't matter because the ability to repay isn't the basis of the loan. It's the ability to pass underwriting so the loan can be sold," says Washington, D.C.-based bankruptcy attorney, Brett Weiss.
Builders say they are putting people in homes they can afford and helping them achieve their dreams. Most loans that banks are underwriting now meet stringent government standards.
For buyers with enough cash and income, buying a home can lower monthly housing costs because mortgage rates are at record lows and rents are surging. Monthly mortgage costs are lower than rent in nearly every major U.S. metro area now, according to John Burns Real Estate Consulting.
Last year, executives at PulteGroup found that nearly 90 per cent of younger buyers wanted to own a home. They loathed throwing away money on rent each month.
"The dream of American home ownership has not died at all," said Pulte vice-president of marketing Fred Ehle. "It was somewhat of a surprise to us."
But Gen X and Yers also had reservations about buying so soon after watching the housing market crash and burn. They also feared they would not qualify for a mortgage.
The number of people aged 25-to-34 who bought homes in 2011 fell to 27 per cent, the lowest share in the past decade, according to the National Association of Realtors. Rising student debt has played at least some role in that decline, analysts said. According to the U.S. Consumer Financial Protection Bureau, about 50 per cent of young people who started college in 2003 were paying more than 10 per cent of their income on student debt.
In response, Pulte launched a mortgage adviser program, whose members are buying houses at twice the rate of prospective purchasers who do not participate.
The advisers hand-hold customers through the entire home process, from picking the floor plan to arranging the mortgage to taking as many calls as necessary to assuage fears.
"I could call whenever I needed to with whatever I needed," says program member Erin Shafer, a 23-year-old school teacher who is buying a new home, along with her fiancé, in Woodstock, Ill.
The couple have student debt, but they had enough for a down payment due to a relative's recent death. Pulte is giving them $5,000 for closing costs, $3,000 worth for free appliances and a mortgage.
The Clarks thought they would remain renters forever. But early in the summer, a friend recommended that they meet with Janet Backman, a grandmotherly sales agent for Southern Homes.
During that first meeting, Ms. Backman pored over the Clarks' financials and decided to put them in what she calls her "Incubator."
That's the process Ms. Backman uses to convert the credit-challenged into home buyers within a matter of months. It drives her crazy that people in her area pay more to rent then to own.
The Clarks had no credit cards and paid for everything with cash. So as Ms. Backman talked with them that first day, she simultaneously signed them up for credit cards on the Capital One website.
Then she told the couple that, if they made $50 worth of purchases each month, but only paid the balance down to $25, their credit scores would likely rise immediately.
Within a month, Ms. Backman got the couple's scores up enough to qualify for the zero-down government-backed loan she secured for them through a partner lender.
Southern Home's sales agents have sold 162 homes so far this year, with nearly all getting similar advice and loan terms.
Says Ms. Backman: "Every time I hear about how hard it is to purchase a home, I'm thinking, what planet are they living on?"
This content appears as provided to The Globe by the originating wire service. It has not been edited by Globe staff.