You may be hoping that a rent to own will be your ticket to owning a home. That your less-than-perfect credit score will be overlooked. Or that it’s a great way to avoid wasting money on rent.
It can be all of these things!
The idea is that you can purchase the house you are renting using a portion of your rental payments to help cover your closing costs. Unfortunately it’s often setup wrong, making it very difficult for you to actually purchase the house.
But when you know which homes to search for you can be well on your way to kissing lease payments goodbye.
Getting Started With Rent To Own
I’ve come up with 21 simple pointers you can start using right away. Some will be useful for saving money, some for speeding up the time it takes you to purchase a home.
- The upfront fees are completely negotiable. You’d be surprised at how many tenants willingly fork out $10,000 in upfront option fees, just to lose it after their buying period expires.
- Try to request that your normal lease deposit be used as your upfront “option fee”.
- Speak with a bank like LendingTree BEFORE signing your contracts for a rent to own. Make sure to ask how much home you can afford.
If you have poor credit, create a workable timeline together to estimate how long you will need to reach the minimum credit rating.
- Confirm that any “rent credits” discussed upfront are actually listed in your rent to own contracts.
- Order an appraisal. It may turn out that the home appraises for MANY thousands below the seller’s asking price. A rent to own home way overpriced is very likely to fail.You could also have a Realtor run an analysis on the property’s value.
- Use rent to own contracts designed for this type of transaction.
- Avoid paying a rental amount higher than retail.
- Check your credit sooner rather than later. There may be some errors on your report that can quickly be removed. View your credit report for free here.
- If you have poor credit, work with a quality credit improvement company as quickly as possible.
- Have the homeowner provide you with proof that the mortgage is up-to-date.
- Use a buyer’s agent to represent you and to review all documents.
- Search rental listings. Just ask for the option to rent to own. You could even come prepared with rent to own contracts.
- Don’t forget that you might be required to bring cash to closing when you purchase.An experienced buyer’s agent can provide you with a close estimate based on the rent to own paperwork.
- Review everything. Paperwork, home, tax records, appraisal, out-of-pocket costs, credit rating.
- Never email your credit report to online sellers.
- Walk away from Craigslist rent to own homes with a seller who had to “move out of the Country”. Almost all of these are scam listings.
- If you’re not positive that you want to own the house, avoid it altogether. You are probably wasting your time and the seller’s.
- Enjoy more detailed rent to own info free. Stay tuned for our newsletters by email with helpful information.
- Qualifying to move in to a rent to own home doesn’t mean you qualify for bank financing automatically. It’s your responsibility to qualify for a mortgage and to purchase the home before the “option period” expires. If you fail to secure a mortgage and the option period expires the owner is no longer obligated to sell you the property. This is exactly why you should avoid putting down HUGE option fees upfront. Because the option fee is non-refundable. Unless stated otherwise in the rent to own contracts. This is also why you NEED to work with a credit repair company ASAP! So you know how much time it will take to qualify for a mortgage and what needs to be done to qualify for your mortgage.
- Found a great deal with a rent to own company? Ask what percentage of their rent to own homes are purchased.Request to speak with some previous satisfied customers.
- This is not owner financing. With owner financing you are actually purchasing the home and making mortgage payments.A rent to own is similar to a traditional lease. With the added “option agreement” allowing you to purchase the home during a given time frame, for a specific price.