Rent to Own Case Study with Julie and Joe

 
pexels-photo-1648387-min.jpeg
 

Julie and Joe have the ability based on their current income to purchase their own home for their family in the $250,000 price range, but due to financial mishaps in the past, their credit and lack of savings is not at a sufficient point where a bank will approve them for a mortgage today. They will need a total down payment of $25,000 (or 10%) and their total available savings today is $11,000 leaving them short $14,000.

They both decided that rent to own sounds like an option that could work for them where they could live in the home of their choice now as renters, while slowly allowing them to build up their total down payment and repair their bruised credit history in order to qualify for their own mortgage later on to buy out the property. Julie and Joe are also tired of renting from landlords and have been forced to move to new rentals several times due to the owner selling the property from under their feet.

Julie and Joe understand that the price that they will purchase the property at in 2 or 3 years time, will be slightly higher than what LIVE RENT OWN has purchased it at in the beginning of the agreement to account for regular year over year market appreciation; However, this agreed upon future purchase price will be slightly lower than the actual market increase rate in order to stay on the safe side when it comes time for the bank to appraise the value of the property at the end of the rent to own term. The future purchase value does NOT increase if the market value ends up going higher in Julie and Joe’s favor.

Julie and Joe sign a “standard lease agreement” and an “Option to Purchase agreement” with LIVE RENT OWN locking in the future purchase price of the property they are looking to do the rent to own on for $250,000. Their initial option deposit to buy into the purchase option agreement is $11,000 (which would be applied as a credit towards the purchase of the home when they successfully qualify for their own mortgage and exercise their option to purchase).

As mentioned above, Julie and Joe are short $14,000 to meet their total down payment number required by the lender which is 10% of the future purchase price of $250,000….$25,000. In a 3 year rent to own term they will have to make additional monthly option payments of $388.88 on top of paying normal market rent of $1500. They will also be responsible for utilities and any repairs or up keep as it will be their home in 3 years when they qualify for their own mortgage and use their right to buy the property with the purchase option contract.

Fast forward 3 years…. Julie and Joe have successfully completed the rent to own program with the help of our credit and mortgage professionals who assisted them to get their credit on track to qualify for their own mortgage and they have also saved and met their total remaining down payment goal of $25,000 during this time. They qualified for their own mortgage and purchased the property having the title transferred into their name.

SUMMARY of Julie and Joe’s Rent to Own numbers break down:

  • Future purchase price: $250,000.

  • Total down payment needed at end of rent to own: $25,000.

  • Initial option deposit: $11,000.

  • Down payment amount needed to be accumulated during rent to own term: $14,000.

  • Rent to own term length: 36 months.

  • Monthly option payment: $388.88 ($14,000 / 36 months).

  • Monthly Rent payment: $1500.

  • Total monthly payment: $1888.88.

Please keep in mind that these numbers are for the purpose of show casing how our rent to own program works and the actual numbers will vary depending on location, city and market.

If Renting to Own your way into a home is something that you would be interested in APPLY HERE and we will get back to you within 24 hours.

LIVE RENT OWN TEAM.