For a lot of Americans today the dream of home ownership seems out of reach. Rates have skyrocketed over the last few years, and right now it’s extremely difficult to get into a home without good credit and mega bucks to get a down payment.
This can be discouraging, especially to those with larger family members or small children. Having too little room and no back yard, in addition to hearing the neighbors through the thin walls of an house building is not what most of us want for our brood.
Still in recent years an increasingly popular and mutually beneficial option has appeared for people facing these or other related home-buying issues. The method is termed “how to buy a rent to own house” (which is similar to a Lease Option) and it can be a viable option for anyone who finds themselves with limited down payment money, revenue, or credit. It can allow an aspiring homeowner to find yourself in a house before they have completely fixed all of their credit difficulties, and with less money out of their pocket.
Even more encouraging would be that the acheter ou louer to own house buying process doesn’t usually require getting qualified by a Loan Broker or a bank just before moving into the house. Because the Seller is a real person with a genuine need to sell their house, they are typically more flexible and willing to work alongside a buyer than a financial institution would be. And depending on the circumstance, the seller is quite often able to accept a down payment that may be considerably less than a bank would require. These pluses are incredibly appealing to many Americans who have been unable to keep pace with high housing fees, or who have had events which have temporarily lowered their particular credit score.
In exchange for these advantages, the buyer of a rent to get house needs to be flexible in other ways. Usually this type of new buyer is expected to pay close to (or even slightly above) market value for the house and the may also pay above-market local rental prices. This is because of 2 things:
1) The home seller typically needs above-market rents to help cover his mortgage.
2) The home seller will often give “Rent Credit” to the prospective buyer in exchange for a higher monthly rent.
For example , require a home worth $300, 000 with a monthly mortgage payment regarding $2, 200. The owner needs to sell it, but there are several other folks in his area that are also for sale, a few perhaps detailed at even lower prices than his. The home seller chooses that he wants to sell to a rent to own buyer so that he can get the home sold quickly and for the price he requires.
The seller may offer the house at $295, 000 using a monthly payment of $2, 400 and a 3% Option Thing to consider (which is money or “down payment” giving the customer the Option to purchase the home in a pre-determined amount of time at a pre-set price). Most times this Option Consideration is non-refundable even if the individual is unable to purchase the house.
In this example, the rent owning buyer will bring the 3% Option Consideration to the vendor (before move in) and begin paying the rent. They will have agreed upon the price of $295, 000 (which can’t increase managing value of the home does), and they will have agreed that the buyer will have a pre-determined amount of time to exercise their “Option to Buy”- for example , 2 years.
It may also be agreed upon from the Buyer and Seller that $600 of the $2, 500 monthly rent will be considered “Rent Credit” and utilized toward a down payment. This Rent Credit money be used when the rent to own buyer finally qualifies for a loan, plus officially takes ownership of the house. (Within the agreed upon a couple of years)
This is a simple example, and terms are negotiable in transactions such as this, but this scenario is common and was used to help clarify some of the elements of the process.