Rent-To-Own Question?

Question

I've been talking to a property owner who is willing to do a rent-to-own deal with us.
Our credit is poor, so this will help us get into a house right away.

My question is, if they decide to do this, how much should I be paying?
My understanding is that we pay a set rent price, and then a percentage that will add up to be our 5% down at the end of the term.

Right now they are asking $1350 for rent, how much more than that would you estimate I'd end up paying with the rent-to-own deal?

Thinking of a 1 - 2 year term, but that has yet to be determined...

Would this be a good deal for me to do? It's a great house, if the owner goes for it, I would love to have that house.
Thanks

Answer 1

What you are talking about is a Lease Option, not rent to own. In a rent to own deal you rent for an extended term, typically 5 to 10 years, and receive clear title at the end of the lease as long as you have abided by all terms of the contract.

In a Lease Option, you usually pay a fee -- the Option Fee -- to the landlord in exchange for a right of first refusal to purchase at a pre-agreed price at the end of the least term. Part of the rent may be applied to either the fee or the down payment. If you choose to not exercise the option you lose the Option Fee and any rent that would have been credited as down payment is simply considered as rent.

If you are working on cleaning up your credit and expect to be able to qualify for a mortgage in a few years a lease option is one way to go. The downside to it is that if you are late on any payments the purchase option may be lost and all monies paid are just rent and the landlord is no longer obligated to sell you the property at the previously agreed price.

Answer 2

this is not the place to ask for financial advise. u will get advise from good well meaning folk but many will be broke and u may wind up like them. i would suggest u head to http://www.daveramsey.com/ on the right look for ELP (endorsed local provider.) these are trained pro's and they will give u the best advise with the heart of a teacher i guess for free until u decide u need their services. and also read the book Total money make over. u will know exactly how to resolve ur situation.

Answer 3

This is NOT a good idea at all! Fix/repair your credit. It will take a few years, but the interest rate you'll receive then is going to off-set what you're going to pay this guy. This is insanity at its best!!