Exactly how does it work?
2007-03-08 09:29:19 · 7 answers · asked by Anonymous in Business & Finance ➔ Renting & Real Estate
When you lease to own, part of your rent money is applied to buying the house. If you have bad credit or low income that would make you unable to qualify for a loan right now, but you expect to be able to qualify within a couple of years, it may be a good option. Otherwise, skip it until a time when you can qualify on your own or just get your own mortgage.
2007-03-08 09:37:12 · answer #1 · answered by Brian G 6 · 0⤊ 0⤋
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2016-07-19 03:27:32 · answer #2 · answered by ? 3 · 0⤊ 0⤋
Lease or Rent to own situations are usually set up like this...
You pay a higher monthly rent than you would normally pay for a home with the excess amount being placed in a trust account that will eventually go towards a down payment at the end of the agreed upon time.
At the end of the agreed upon time you arrange for your own financing and purchase the home with this down payment.
Problems occur with poorly written agreements and the excess money not being paced in an appropriate trust account for the benefit of the renter/buyer.
Problems also arise if the market drops or increases during the rental time - in this case someone will not be happy and will want out!
For example:
You agree on a purchase price of $100,000 and a 2 year rent to own term paying $1000 rent with $200 going into the "down payment trust account bank".
After 2 years you have $4800 in the "trust account down payment bank" along with some savings - enough to buy with 5% down. During the 2 years you have established and or improved your credit therefore financing shouldn't be a problem.
BUT... now the market has dropped and the appraised price isn't $100,000 but dropped to $80,000! The bank won't lend you enough! You dont want to buy it now because it isn't worth what you contracted to buy it for - you want out! What happens to your $4800?
OR...now he market price isn't $100,000 but it has risen to $120,000! the Seller does not want to sell it to you now for $20,000 less! They want out!
These are all scenarios that should make you leary of this type of purchase.
Better than this would be the following:
Why not try to obtain conventional financing even at a higher rate but for a short period of time till you can refinance at a better rate...
Or...
Purchase with vendor financing for a short period of time until you can obtain conventional financing.
Either way, the contract and documents need to be prepared by a professional Real Estate lawyer...DON'T DO THIS ON YOUR OWN!
Hope this helps...
2007-03-08 11:13:10 · answer #3 · answered by glen s 3 · 0⤊ 0⤋
It is mostly used for people with not so perfect credit. People that have bancrupcies and foreclosures, things of that nature. My advice to you would be to get a realtor before you go into a rent to own. Try Keller Williams There agents they are great. If you have any other questions feel free to email me. I hope that helped
2007-03-08 09:40:49 · answer #4 · answered by ~Skittles~ 4 · 0⤊ 0⤋
means the money u put toward the rent can go into an escgrow to buy account. problem is the owner can back out of the contract to buy at ne time and they u lose all ur money that u have put into the house to buy. been there, did that.
2007-03-08 09:32:39 · answer #5 · answered by Anonymous · 0⤊ 0⤋
You can lease with an option to buy a house here:
http://www.scbuyshouses.com/forms/customform.cfm?formID=32965
2007-03-09 10:59:31 · answer #6 · answered by Anonymous · 0⤊ 0⤋
Rent To Own Homes - http://RentToOwnHome.uzaev.com/?wHCh
2016-07-12 12:34:49 · answer #7 · answered by Glenna 3 · 0⤊ 0⤋