Rent to own houses sounds very simple in theory, theoretically, for those who don’t qualify for an outright mortgage loan now. You just get to move in to a house right away without any type of payment until you’re ready to buy. In theory, this would be the ideal way for the financial savvy homeowner to get into their own home and gain instant equity. However, is it really the best solution? This article covers both the pros and cons of rent to own homes in general and guides you to avoid a bad choice.
You will need to seek professional advice before you sign any contracts, and if you’re not well versed in the real estate market, you may want to consider using an experienced agent to help you find rent-to-own homes. A qualified agent can look at your needs as a homeowner and match you up with properties that best suit you. He or she can also find the property that fits within your budget. This means that you won’t have to compromise on the quality of the property, as well as your affordability.
The process of getting approved for these loans is similar to most traditional mortgages. The difference is that instead of a traditional mortgage company handing down a contract to a buyer, you are going through a process with the bank. After you submit an application and are granted permission by the bank to go forward with the purchase, you will then sign a contract and release the title to the buyer from their legal hold onto the home.
The pros of rent to own homes outweigh the cons by far, however. Because the transaction is between you and the buyer, you won’t be required to provide thousands upon thousands of dollars up front in a down payment. You also won’t have to worry about a credit check, down payment or any of the other hassles that come along with conventional mortgage loans. This is by far the best option if you have a lot of credit problems or if you simply don’t qualify for a traditional mortgage.
However, if you do find yourself in this situation, there are a few things you should know. Rent to Own Homes sounds like an ideal situation, but you must realize that it takes time to qualify. While some people have been approved within minutes, others were not even accepted after submitting their applications. This is why it is crucial that you put careful consideration into whether or not this type of loan is the best option for you.
If you are determined to purchase a home, but you don’t have good credit, you still have an option that will allow you to rent to own homes. The terms are not as good as with a traditional mortgage, but they still work. Since the interest rate is usually so high, the rent you receive is going to be very low. The amount that you can rent-to-own agreement to pay back is based on your income, not your credit. This makes the deal much more attractive to qualified buyers.
A typical rent to own homes agreement provides the following elements: the sellers will hold the deed to the property, they will finance the mortgage, you will hold the title, and you will get to rent the property as your monthly home until the full lease term has been completed. This is considered to be a “seller-financed” real estate transaction, meaning that you have to actually pay back the money you receive from a rent to own homes plan if you decide to move, quit renting the property or want out of the lease. These plans differ slightly from traditional mortgages because the seller retains the title, so they do not need a down payment. These types of transactions are sometimes referred to as seller-financed real estate deals, even though the financing is from the buyer.
If you are interested in rent to own homes, it’s a good idea to find a real estate agent who specializes in this type of real estate transaction. They can help you understand the finer details of how the process works and can also negotiate a better price based on your unique circumstances. You may qualify for more options than you think, and it is important to take advantage of every option. For example, some sellers qualify for the “stacked” fee agreement which allows them to shift more than their entire down payment to the end of the contract. Be sure to shop around, and know what you really need before signing any contracts.