How Does Lease-To-Own/Rent-To-Own Work?
Many people desire to own a home, but do not have enough money saved to pay the full price of the property. Those people can still own property by taking out a loan with a mortgage lender. The ability to get one of those loans is based on employment history, income, credit rating, and your assets and debts.
If obtaining a mortgage is not possible due to credit or other issues, then you're out of luck, right? Not necessarily. A few homeowners are able and willing to allow you to Lease-To-Own their home. Unfortunately, very few landlords or home sellers know how to do this correctly, or just don't offer it. But we're experienced at helping people get into their own home this way. Rent-To-Own terms aren't very common or easy to find, but they can be a great option for buyers who want to own their own property but because of credit issues or lack of the expected 20%+ down payment most banks expect, they cannot go the conventional Mortgage-Realtor-Title Company route.
Depending on the terms offered, when you decide to Lease to Own a home, you need to make your payments and exercise your Option within the time permitted and complete the purchase or your Option money may be forfeited. You are leasing/renting, and have purchased an exclusive Option to purchase the home. This means that while the Option is valid, and your payments are current, we can't and won't sell the home to anyone else, only to you. The Option contract, which can typically range from one to five years (extensions are possible), will also state the purchase price of the home, or the price may simply to set set to the appraised value at the time of your purchase. We encourage people to make plans ASAP to arrange your mortgage and buy the home within the term of your Option to purchase the home. The length of the lease will also be specified in the contract, and it is generally renewable as long as payments remain current. In some cases, the owner may allow you to buy the home on a private contract (no mortgage or bank loan needed), where you make payments to the owner/seller until the home is paid off or refinanced. Though most banks require 20-25% down, we may be able to offer it for less, sometimes as low as 10% down.
Like a typical homeowner, the Lease-To-Own renter will most likely be responsible for covering any repairs to the home. Like any homeowner, this maintains as well as adds to the value of the house, as well as your general well-being and happiness in your home.
As part of signing the Lease-To-Own contract, an up-front "Option Consideration" is usually required. This is 100% credited to the purchase price of the home if and when you buy the home under the terms of the contract. This Option Consideration amount may be anywhere from 5% to 10% of the final purchase price, depending on the property. Your Option Consideration is not refundable, and it buys you an exclusive Option to purchase the home during a set period of time.
Leasing-To-Own is great if you want to begin feeling settled and stable in your home prior to actually buying it. It can be beneficial for people who have trouble obtaining a mortgage, but generally only if their troubles are behind them, or at least in the process of being resolved. People who want to own property will be expected to build or rebuild their credit and to continue, or create, a stable employment and income history. At the end of the lease and after following the proper steps, we expect that you will be able to get a mortgage/loan. Renting-To-Own is a great way to get into a home for people who have damaged credit, and it may be right for you! And when you are ready to get a loan and pay off the seller, you're already in the house and settled; so you're inside looking out instead of wondering if you'll get pre-approved for a mortgage, and wondering when you can start looking for a home, and wondering if and when you'll actually be able to make an offer that you can follow through on. And if you do have good credit, or don't know your credit, we can help you figure out where you stand, perhaps you can excercise your Option within just a month or two, it's happened.
Please contact us with any specific questions you may have. We look forward to working with you to get you into a home of your own!