Rent to Own Homes...good idea?

Question

My fiance and I are contemplating whether buying a home or renting-to-own one, is a better idea. Currently I am 4 months pregnant and we wont to have something established by time the baby gets here. As a former loan officer I dont really know of too many people who can go through the process of getting a home that fast, especially not with credit like ours, lol. That being said, do u think it would be a better idea to try a "rent-to-own" home, where we wont have to worry about bank loans, ect? If we find a home over the next year we can always just move, considering the acutal RENT for the rent2own homes in our area are around the same or LESS than actually renting a condo or some homes? What do u think?

Answer 1

rent to own homes work like this. First you put down a non-refundable deposit that goes toward the purchase of the home. If you dont buy, you dont get it back. Now lets say the market rent in your area is 1000 per month. You will pay 1200 or 1300 per month for your home with maybe a few hundred being put toward the downpayment. (some rent-2-owners dont do this though and you just get market rent with nothing going toward DP)
The price of the home should be negotiated first and is usually above market price. (If homes are 100,000 in your area, then the owner might ask for 110,000) This all varies depending on how long the lease is going to be, but most do 2 or 3 years.

Now becareful because some rip-off artists will no set the price and then just tell you "Oh i'll give it to you at whatever market price is in 2 years" This sounds good to some people, but I know a woman this happened to in las vegas right before the boom and the house she was in went up in value 100,000 dollars. Guess who gets that equity and now cant afford to buy the home in 2 years because its too expensive. Thats right, the owner is now going to kick out the woman after the lease is up since she wont be able to pay that extra 100,000 dollars on the house. (this of course is a rare that a house goes up in value like this, but we all know las vegas had that 50% just in value in 2004 for just that one year.) So get a set price. However long a lease you get find out the market value of the home and add 4% for each year you get a contract to lease it. Thats a fair offer. Also remember we are in a decline right now, and I expect prices to keep going down until about 2009 which is when i believe we will be back on a normal housing appeciation cycle again.

If you dont believe about the appeciation cycle, click on yahoo real estate and look at the housing market snap shot for any area of the last 5 or 10 years. You will see we just hit the top of the cycle and we are on a downtrend.

Rents are at lows right now, with all the competition and most landlords will lose money every months just to get tenants in. In my area a 3bdrom house to rent costs 1200 per month. To buy it my mortgage would be 1800 per month + i would be paying 3000 per year in property taxes, my own water/garbage plus have to fix anything that goes wrong in my home. So i save approx 900+/- per month by renting. I did the math once and figured it would take something like 11 to 12 years before i was ahead in my home than if i had just saved all that money and invested at 5% interest in bonds every 6 months. Not to mention the stress of having no money for 10 years because its all going to the house. I dont know about you, but saving 900 per month is a nice vacation anywhere in the world a couple times a year for me. But then again, your market may vary. For instance OH looks like it could be a good time to buy there as its getting close to a bottom, but anywhere in California is bad right now.

Anyway...in summation i think rent2owns are bad ideas. Just like the rent to own stores where you buy a computer or a couch. You pay too much. They are only there to take advantage of the poor, or people desperate to buy a house because they have the media telling them thats the best thing to do. Do your research and find out if its a good idea to buy in your area (dont ask a realtor as they will always say yes because they are there to make money) Sorry i went on for so long.

Answer 2

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Answer 3

Here is the big problem with rent to own. The market is unpredictable. If you rent a house with an option to buy you usually decide months in advance what your purchase price will be based on those current market conditions and pricing. In 12 months things can change entirely. It is risky for both the buyer and seller. If prices go up the buyer could be getting a good deal this way but the seller will get less that market value. If prices go down the buyer may have negotiated and agreed to pay a price above market value. Most of the time people who lease with the option to buy do not exercise that option. Before you buy make sure you plan on living in that house for a few years because it is a good time to be a buyer but not a good time to be a seller. Now is a good time to buy in many areas because prices are low and interest rates are very good (4.5%). If you have a credit score of 620 or more you should be able to qualify for an FHA loan. The down payment minium is 3.5%. Many times your realtor can negotiate to have the seller pay your closing costs which usually come to around 3% of the purchase price. The down payment and closing costs are two different things. As a buyer I recommend that you use a realtor. In Arizona, at least, the realtors fee is paid by the seller so there is not reason not to use their professional services. An agent can help you find the right property and can negotiate on your behalf and help you through the maze of buying a home. The best place to start the process is to meet with a mortgage lender to see how much you qualify for in a loan. Or if you have issues to overcome so you can qualify they can advise you on that. One more thing. When the lender tells you that you can qualify for a certain loan amount ask them what your entire payment will be (principal, interest, taxes, insurance) and make sure you are comfortable with that payment in your budget. Figure out what payment is comfortable for you and ask the lender how much you can spend on a house to keep your payment around that amount. You may technically be able to borrow one amount but that might give you a payment that does not fit your budget. One more thing. Some cities or even the government has grant programs to help with down payments. Ask different lenders if they deal with grant programs, what those programs are and how you qualify for one.

Answer 4

This Site Might Help You.

RE:
Rent to Own Homes...good idea?
My fiance and I are contemplating whether buying a home or renting-to-own one, is a better idea. Currently I am 4 months pregnant and we wont to have something established by time the baby gets here. As a former loan officer I dont really know of too many people who can go through the process of...

Answer 5

you insinuate that your credit is poor- then you may have an issue with renting as well, since a lot of landlords do credit checks before renting. You may get stuck with a higher interest rate if you buy, but may be worth it if you make your payments on time and refinance after a year or two for a lower rate. good luck with the search and the baby as well!!!

Answer 6

Rent To Own Home : http://RentToOwnHome.uzaev.com/?UEck

Answer 7

Rent to own is now illegal in Texas and no Realtor contract in the US supports rent to own because the tenents always get ripped off. The landlord may pockey your money and deposit and evict you. You will have no recourse. Very bad idea. Howeve these days, its easier to buy than rent.

Answer 8

owning homes are better than rent to own cause it is stilll not yours until it is paid off. at least when you own you can do whatever you want cause the bank doesn't care just as long as you make your payment.

Answer 9

Rent in any format is a bad idea. Base your income on your fiance pay , not yours. You won't work after the baby is born. What is there to worry about bank loans? Sound like your not responsible with money. Now you want to have children. Come on. Who's going to teach them finical responsibility? The only thing your going to have established when the baby is born is more debt. Good Luck.