Can't Afford a Home? Try Rent to Own

If you have bruised or even bad credit a lease purchase/rent to own home may be the best way to homeownership. This is almost tailor-made in these times when homes are decreasing in value, foreclosures are rising, and loans rates are lower but harder to get approved for. More and more buyers are seeing this as a way to their dreams of owning a home while sellers are seeing it as a way to avoid foreclosure and financial ruin. If you find yourself wanting to own a home but unable to get approved for a mortgage loan this may serve as a guide for you.

What exactly is a rent to own/lease purchase? A rent to own home is where you lease a home, but you also control the property by having the option to purchase it at a certain point and time during your lease or rent period. What you pay will vary from place to place. First of all there's the monthly rent or lease payment itself which is your normal monthly payment determined by comparable rents or the existing mortgage payment. Then there's the option fee which is what is charged by the owner or seller for giving you the option to buy the property. I've heard anywhere from as low as $10 to as high as $5000 for the option to buy. Finally there may be a deposit which may be required to enter into the lease purchase contract with the owner. The key thing to remember is that everything is negotiable including the option fee, deposit, and a percentage of the monthly pay that goes toward the final purchase price.

Qualifying for a Rent To Own Home is based more on the ability to pay rather than credit scores. The first step in getting a rent to own home is determining how much a month you can afford given your current income and credit situation. You may even want to go as far as figuring out your "debt to income ratio" which lenders use to determine the monthly payment you can afford since you do plan on eventually owning the home you rent or purchasing a home soon after. You will want to cut whatever spending necessary to save up enough to cover any expenses that come up with getting into your rent to own home. When contacting a potential rent to own home owner be sure to ask what every fee amount will be.

The end price the home is sold to you for will normally be determined by the area market value minus whatever monies you have negotiated to be subtracted from the final purchase price. Don't forget that your option payment for the rent to own home is applied to the purchase price or down payment as well. You normally have a year or more to exercise your option to buy, extend the option period, or move. During this time period its best to continue saving and fixing your credit in case you'll have to get a loan in order to buy the house. In some cases the owner maybe willing to carry the loan himself where as you just continue to pay the agreed amount every month like normal.

Finding rent to own homes may be easier thank one might think. For starters, the web is probably one of the best and most abundant places to look. You can do a search on one of the major engines for "rent to own" or "lease purchase". You may also find some great values on classified ad sites like Craigslist and Pennysaver. The local paper is also a good source of rent to own properties. Alternatively, you could ask your local real estate agent or visit homes that are For Sale By Owner. These present the best opportunity for lower option fees and more negotiation being that a lease purchase option may give a motivated seller a way to get their home sold. Without dealing with mortgage companies or banks, a rent to own home is a fantastic way of acquiring home ownership.