If you decide to use the rent to own financing option to purchase your home, it is important that you prepare yourself for the reality of the situation. Knowing exactly what you are getting yourself into is key, particularly when legal contracts are signed and you become liable for certain financial aspects of the contract.
This article will run you through the basics of determining whether or not you are qualified for a future loan before you enter into a rent to own contract.
Since the goal of a rent to own contract is to give yourself some time to get your expenses in order before purchasing a home, you should have a plan on how you are going to save that money to purchase the home.
The Ball Is In Your Court
Ultimately, only you can determine what kind of home you can afford and how much you want the monthly payments to be.
Sit down with your significant other (or if you’re by yourself) collect all of your income and debt statements. It will be important to know exactly how much you make on a regular basis and exactly what your current debts are.
One of the most common mistakes that people make when preparing to finance their homes is that they will often inflate, in their minds, their actualized income.
Perhaps it is because they do not account for insurance, taxes or other automatic withdraws from the account, but knowing exactly how much you bring home on a monthly basis is going to play a huge role in your ability to get a mortgage.
What Are You Spending?
Assuming that you have decent credit, it is actually your monthly spending that becomes more important in the mortgage finance calculation than any previous debts that you may have or have had in the past.
For example, you may have a $5000 car loan that you pay on a regular basis, but that monthly payment can factor into the actualization of your monthly income.
What is more important is figuring out how much you spend on eating out.
How much do you spend on entertainment? What about clothing?
You need to collect your spending data. You don’t need to detail exactly where every single penny goes in your spending, but taking a look at the last 12 months will allow you to better prepare yourself moving forward into a rent to own property.
Remember, with a rent to own you will be paying rent plus a monthly fee during the contract period. Factor this into your calculations.
By making yourself aware of your spending habits, you can prepare yourself to enter into a rent to own contract with confidence. You will be able to create a plan to save money for a down payment on the home of your dreams.
A lease option will allow you the time to do that!
Check out some of the homes listed on our website to see what kind of homes you could potentially qualify for at RentUntilYouOwn.com.