There are a number of benefits for doing a rent to own where it can help you and your family “get your foot” in the real estate market door, but before we get into these benefits it is important to understand that doing a rent to own is typically more costly than owning your own mortgage initially. The reason for this is that in a rent to own many clients aren’t in a good position to qualify due to having bruised credit, high debt loads, low provable income, and lack a sufficient amount towards a down payment that is acceptable to where a lender is comfortable giving out the loan to protect their invested interest; In the rent to own program, you would only need to come up with 3% or $10,000 (which ever is higher) in order to buy into the option to purchase the property in X # of years to start the rent to own; however, since the initial option deposit that you came up with was only 3% of what the bank lenders feel comfortable with (10-20% down payment), the remaining difference between what they like to see and what you came in with to start the program will need to be accumulated over the 2 or 3 year rent to own term either as additional monthly option credit payments or yearly lump sum payments (which ever is most affordable for you). This is the reason why rent to own typically costs more than an actual mortgage if you were able to qualify for one today.
So you might ask why should I do a Rent to Own if the monthly payments are higher?
Can’t I save on my own and fix my own credit?
The short answer is yes you can, if you have the know how, the will power and the right saving habits…
The power of a rent to own for a tenant buyer is in the purchase option contract, which allows you to control the property without actually owning it yet (provided that you make the rent payments and additional monthly option payments on time and free from default), meaning that between you and the home sponsor, a future purchase price is agreed upon at the start of the program at a fixed price with built in market appreciation that is slightly lower than what the current market appreciation rate is regardless if the market goes higher when it comes time for you to exercise your option to buy. This gives us time within the 2 or 3 year period to work with you to come up with a plan to get your debt paid down and credit up to where it needs to be and for you to accumulate the remaining down payment that is favorable to the bank lenders to obtain your own mortgage to buy the property at that locked in future purchase price in 2 or 3 years.
You can do this on your own, yes, but without the purchase option contract to lock in the future purchase price to give you that target purchase price goal number that doesn’t move, there is a possibility that by the time you are ready to qualify for a mortgage on your own, property prices have run too high putting you back to square one with not having a sufficient amount of down payment to qualify for the higher valued mortgage on the rapidly appreciated property value. You can kind of think of this like hunting where if a critter is standing still in an open field, it will be much easier to hit than if that same critter was on the move. A purchase option contract keeps the critter (future house price) in one spot and gives us a goal to work towards.
In the program we also allow you to make approved property improvements that would increase the value of the property to build in additional value above the agreed upon locked in future purchase price making it more favorable for a bank to lend a mortgage to you as the purchase price is way lower than what the actual market value of the property would be with these built in improvements; The work you do to the property to increase the property value is yours and we do not raise the agreed upon future purchase price.
In Summary, these are the benefits of doing a rent to own as a tenant buyer:
Ability to lock in the future purchase price at the start of the program.
Any approved property improvements done by you to increase the value is yours.
Rent Payments are fixed for the duration of the rent to own term.
The program gives you the ability to repair your credit, pay down debts and accumulate the remaining down payment money needed to qualify.
You are essentially the home owner NOW in training!
In our rent to own program, we work with you to understand your goals and we take a look at your situation today and come up with a plan for you to follow to successfully qualify for your own mortgage in the end to accomplish your dream of home ownership.
If you are interested in our Live, Rent, Own program please apply at the link below and we will get in contact with you to start the process!