What are the DO's and DONT's of "lease-to-own" program in getting a house. Help Pls. Im doing it soon

Answer 1

Best? As the buyer or as the seller?

Legally no renter can be required to make major repairs or to fix the major systems that determine if the property can be inhabited (heating, roof, hot water, electrical, etc). Even if both parties agree that the tenant will pay the agreement can not be enforced. The landlord is still the landlord and to collect rent they need to provide basic services.

Be very careful about how the price is set. If the price will be locked down later, what formula is being used? How long is the option? What is the buyer does not qualify at that time? Is there any part of the monthly rent being credited toward the future purchase? If the credit means that the tenant is paying below market rates to rent the future lender will likely deny the credit and expect a higher down payment.

Answer 2

The first thing to do is find out what effective interest rate on the home is. It has been my experience that rent or lease to own arrangements carry very high rates, usually because the folks using this method cannot qualify for a conventional loan (not meant to be a reflection on you, just a fact). If the rate is above 9%, try to get a conventional loan, otherwise -do not- take the offer. You will spend a lot of money for something that you will end up not being able to afford.

The second thing is to carefully examine the contract. How can you get out of it if you need to? How long is the lease for? Can the payments go up, etc? Try and find a community based legal group to review the docs. They are usually free.

Hope this helps.

Answer 3

Don't put any improvements in the house until you plan to purchase - otherwise, you lose the money you put in the improvement.

Set the pricing and timing of the purchase and make it be flexible - let's say any time within the next 5 years.

Find out what the taxes are in advance, and if they will go up based on the purchase price.

Make sure that the contract is clear that the owner must keep the home free from liens, maintained, and list what will come with the house.