About Rent To Own
Quite simply, buying a home
the traditional way means putting a large chunk of cash down, getting a
loan for the balance (mortgage), and paying off that balance over thirty
years. The three biggest requirements of buying a home traditionally
Having a large down payment
Having good credit, and
Having a steady source of high monthly
If you lack the resources to
buy a home the traditional way or perhaps need time to repair your credit,
you may want to consider purchasing a home through a rent-to-own program.
When a seller advertises that
he will consider doing a rent-to-own deal, he will be looking for someone
to lease the house with two contracts. One contract will be a regular
lease contract, and the other will deal with the purchase part of the
deal. This contract will be for a period of time that is agreeable to both
the seller and the buyer, usually anywhere from one year to three years.
Many people think that the seller will simply set aside some of the rental
money as a down payment contribution, but this is not exactly the case.
The buyer will have to pay the regular amount of rent, and in addition
they will have to pay a monthly installment that will be credited towards
the down payment.
Here is an example of
how the seller may calculate your monthly contribution towards the down
Say the purchase price is
$200,000, you have agreed to a 2 year term, and you have already paid
$5000 towards the down payment. In order for you to save up enough money
for a 5% down payment in 2 years, you will calculate five percent of
$200,000 and divide that by the 24 month length of the contract. So in
this case, you will need to save up $10,000, but since you’ve already paid
$5000, your monthly contribution is $208.33. Keep in mind that this will
be in addition to your rent payment. If the buyer decides to walk away
from the deal, they will lose their deposit money, as well as any money
paid towards the down payment. At the end of the contract, you must be
able to qualify for a mortgage for the remaining balance.
Not every seller will
structure the rent-to-own in the same way, but as in any real estate deal,
you can always try to negotiate the terms that are not satisfactory to
you. It is very important that you get independent legal advice for any
contract that you sign.
For some people who need time
to repair their credit score, or are unable to save up for a down payment
any other way, this can be a great way to eventually purchase your own
home. You must be very sure that this particular real estate deal is of
benefit to you, and that you can afford to take the risk of not being able
to follow through with the contract.
Selling A Rental Property
Rental Assistance Program
Provides eligible low-income,
working families with cash to help with their monthly rent payments.
Are you over 60 and need help with paying
rent? Apply today for assistance.