Spokane Rent To Own Homes And Lease Purchase Homes

 

A Rent To Own Home or Lease Purchase Home can be a great solution for those that do not qualify for a traditional mortgage. If you are facing one of the following situations:

• No Credit History
• New Job
• Self Employed
• Commission Income
• Blemished Credit
• Own More Than One Home
• Down Payments Too High

A Rent To Own or Lease Purchase arrangement may be the answer to owning the home of your dreams. Know the facts about Rent To Own Homes Before you sign on the dotted line.

 

 

The Advantages Of A Lease Purchase And Rent To Own Homes

•  Immediate Occupancy
•  Easier To Qualify For Than A Traditional Mortgage
•  Repair Your Credit While Living In The Home
•  You Can "Try Before You Buy"
•  Building Equity From The Beginning
•  A Path To Home Ownership Not Just Paying Rent

A Lease Purchase Option provides you with many features and benefits, but perhaps the most powerful one is the rate at which you accumulate equity. Compare any lender's loan amortization schedule to most Lease Purchase contracts and you'll quickly see that the Lease Purchase contract wins hands-down. Moreover, the buying power of a Lease Purchase contract can quickly and easily land you a home that you would never qualify for the conventional way.

Rent To Own Homes And Lease Purchase Homes In Spokane, Washington

Qualifying for Rent To Own and Lease Purchase homes is not the same as applying for a mortgage. Credit scores are usually not as important as the ability to make the monthly lease payment and your ability to repair your credit during the lease period.

 

 

What Is A Rent To Own Home?

Although there is no standard for a Rent To Own Home Agreement, many contracts contain common provisions. In general a Rent To Own Agreement allows a tenant to become a homeowner if certain conditions are met. Those conditions usually require the tenant/buyer to pay an initial Option Fee and a monthly lease payment for a specified period of time.

At the expiration of the lease period the tenant has the option to purchase the home for a specified amount. Financing the purchase at this time requires the tenant to secure a loan through a bank, mortgage lender or other outside source.

 

The Lease Option

The Lease Option is a term that actually would be better described as the Purchase Option. This can be contained within the Rent To Own/Lease Agreement or exist as a separate contract. This provision normally stipulates the tenant/buyer's right to purchase the home for a specified amount at the end of the lease period. There is usually a fee attached to this known as the Option Fee.

The Option Fee

Although the Option Fee is normally paid at the beginning of the lease period it should not be confused with a Rental Security Deposit. The Option Fee is a fee paid for the right to purchase the home. It is usually not refundable. In some cases it may be applied as a credit towards the purchase price of the home.

Monthly Rental Credit

In many cases Rent To Own Agreements will contain a provision that designates a portion of the monthly rental payment as a credit towards the purchase of the home. This amount varies and can be as high as 50% of the payment.

The advantage to the tenant/buyer is the ability to begin building equity in the home during the lease period, usually at a faster rate than a standard mortgage. It is important to note that if the option to purchase the home is not exercised that the credit is lost.

Rent To Own Example

Home Price $200,000

Home Purchase

At the end of the lease the tenant becomes a buyer and is required to secure financing to purchase the home. In this example the buyer would pay the purchase price less the accumulated monthly rental credits.

$200,000 - $18,000 = $182,000

 

36 Month Lease

3% Option Fee = $6000

The option fee is paid at the beginning of the lease. This gives the buyer the option to purchase the home for a given price at a given time (usually at the end of the lease). This fee in non-refundable and usually does not constitute a down payment, deposit, or credit.

Monthly Rent = $1800

The amount the tenant/buyer pays on a monthly basis to live in the home during the lease period.

Monthly Rental Credit = $500

This amount is credited towards the down payment on the home at the time of the purchase.This accumulates during the lease period on a monthly basis. At the end of a 36 month lease the accumulated rental credit would be $18,000.

Regular Checkups Keep Your Home Ownership Alive

Rent To Own Homes can be a great opportunity to start building equity in a home through Rental Credits while you are leasing it. The downside to a Rent To Own Home Agreement can come if the tenant cannot qualify to purchase the home at the end of the lease period.

Protecting your goal to become a homeowner means making sure that you qualify for a home loan when the time comes. Many sellers that offer Rent To Own homes actually require that their tenant/buyers participate in a Credit Monitoring and Repair program during the lease period.

Don't be discouraged by this - it is in YOUR best interests as well as the seller's. While it may require a little time and expense on your part the result is well worth the investment.

Make Sure that Your Lease Period Is Long Enough

If you have experienced a bankruptcy or foreclosure it can be two to three years before you qualify for a mortgage with most lenders. To insure that your goal of home ownership becomes a reality you may want to contact a mortgage professional and allow them to review your credit before you enter into a Rent To Own Agreement.

They should be able to give you some idea of how long it will be before you can qualify for a mortgage. Make sure that your lease period is long enough to cover this time period. Also remember that you need to take the steps necessary during this time to get your credit in shape.

It's Not Just Your Credit That Counts

Improving your credit rating is important but just is important is making sure that your seller is financially solid. Asking questions about your seller's financial condition can save you from major problems later in the game.

Your seller should have no reservations about showing you their credit or payment history. After all they will almost surely ask you about yours. In addition to knowing your seller's financial condition your should also check to make sure that there are no liens or encumbrances on the property or the seller that you are purchasing the property from.

If there is a mortgage on the home that you are purchasing (as is usually the case) you may even want to request that your rent to own payments go directly to the lender or that you receive periodic validation that the current mortgage is being paid as agreed.

Things to Consider

A Rent To Own Home can be a great way to start on a path to home ownership. The down payment can be made gradually via the Monthly Rental Credit during the lease period. Qualifying for a Rent To Own Home is based more on the ability to pay rather than credit scores. Another advantage is the ability to "Try Before You Buy".

Keep in mind that if you do not to purchase the home at the end of the lease period you can lose your Monthly Rental Credits. At this time your credit must allow you to qualify for a mortgage. Considering this fact it may be an advantage to monitor your credit though a reputable and established credit repair resource