
It will give you an opportunity to “test drive” the lifestyle and find out if homeownership is the right thing for you and your family.
Before you do, however, it’s critical that you know what you’re signing up for. Rent to own, also called a "lease purchase", is just a euphemism for “lease with an option to buy”. The owner of the home agrees to sell you the home at some time in the future at an agreed upon price. As consideration, you will pay him an agreed upon amount (option money and it’s generally non-refundable) to “hold” the property for you.
Sounds simple enough, but as potential first time home buyers you need to focus on the “own” and “purchase” terms. At some time in the future you’re going to have to purchase this home or risk losing your option money and it’s important to do it right!
You should look at this opportunity from two perspectives: Personal and Property
Personal - If you’re not ready to buy now because of credit, income or down payment problems. Will you be able to improve your situation by the time the option needs to be exercised?
If you’ve put off getting your credit in order, if you’re not going to start now, then rent to own is not a solution.
Sitting down with a mortgage professional or credit repair specialist now might seem premature but there’s no one better equipped to give you a detailed plan on how to prepare yourself to buy your first home when the time comes.
You’ll be purchasing this home and that means qualifying for a loan, so your income, credit and assets will have to meet the qualifying criteria in effect at that time.
Property - The location and everything else about the home are perfect for you and your family. You can picture yourself living there a long time BUT unless you’re a “smart first time buyer” now, this might end up being just another rental home when the option comes due.
NO ONE knows where housing prices will be in two or three years, so it’s critically important that you “buy right” now.
Who’s determining the option price? If it’s the owner and the price is too high now, chances are in a year or two it will still be too high and you’ll only be able to get financing if you can re-negotiate the price or bring in a bigger down payment.
Rent to Own can be an opportunity to “dip your toes in the water” for first time home buyers but you still have to be smart and have a good “exit strategy” when it comes time to exercise your option.
For more information on rent to own, contact us.
No comments:
Post a Comment