The Non-Traditional Way
If you are in a situation where you do not qualify for
a traditional mortgage, but would like to purchase a home nonetheless,
renting to own may be a great option for you. Those who do not have
enough money for a down payment or have credit scores too low to qualify
for a bank-financed mortgage are still able to become homeowners through
the process of rent to own.
Though you won’t need as large a down payment as you
would with a traditional mortgage, you will still likely need to put
down a deposit (much the same as you would if you were renting an
apartment). The deposit is typically a percentage of the price of the
home and will go toward its final purchase. You will likely lose this
deposit if you do not purchase the house at the end of the contract.
Monthly payments are determined by the deal. You will
pay rent each month (just as you would with a rental property), but you
will pay an additional amount that will go toward the purchase price,
which is the amount you still owe on your home (after the deposit is
deducted from the total price). You are paying down the final cost of
the home by making these monthly payments.
As with the amount you pay monthly, the length of time
you rent will depend upon the contract. Rent is usually paid for a
period of one to three years, after which you will be given the option
of purchasing the home for the agreed upon price.
At this point, you will have paid money toward the
total price of the home; this puts you in a much better position to buy
it using a traditional mortgage. If you are still unable to secure a
mortgage, the seller may be willing to renegotiate the contract; if not,
you will lose the money you have put toward purchasing the home and will
need to move.
If you are unsure of whether or not you will be able
to buy the home at the end of the contract, another option available to
you is a Lease Option contract. This option is very similar to leasing a
car; you make payments during the leasing period, then, at the end of
the lease period, you have the option to buy the property, but are not
bound to do so. You will, however, waive any deposit as well as all
payments you have made.
To decide if renting to own a home is right for you,
take a couple of things into consideration:
Why do you not qualify for a traditional
mortgage? If your credit problems are a temporary thing perhaps due to a
recent job loss or similar catastrophe renting to own is likely a good
option and may even help you repair your credit to a certain extent. If,
however, you have a chronic problem with bad credit, it would be best to
work on repairing and maintaining your credit prior to considering
buying a home.
Why do you not have enough money for a
down payment? Take a good look at the math; if renting helps you save
money, figure out if you can budget an amount to set aside for a down
payment in a few years.
Finding a Rent
to Own Property
Real estate agents are usually only interested in
selling homes outright so they can collect a commission on the sale, so
finding a rent to own home may take a bit of work on your part.
You may benefit from working with a house
investor like B&G Real Estate Consultants a company that specializes in
helping temporarily damaged home buyers buy and sell homes.
Contact us today!