If you are interested in purchasing a rent to own home, like all business transactions, traditional or otherwise, there are things you need to be aware of and potential pitfalls to avoid.
While today's economy and real estate market provides people with a lot of good reasons to investigate a rent to own home sale, a non-traditional sale between two private parties can leave gaps that neither realized they missed.
Here are a few considerations for buyers to review:
First be sure that the asking price for the home is market price or just slightly above. A lender will not blindly grant a loan in whatever amount the seller is requesting - they will only lend on a current fair market value for the property.
It's recommended that a buyer does some investigation before signing a lease, including purchasing a home inspection to be sure the structure is sound, a title check to be sure it's clear of any liens, and request proof from the seller that they are current on their mortgage payments.
One big issue buyers frequently run into is still being unable to qualify for traditional financing at the lease's end. If a seller isn't willing to wait another year or two and take another chance the buyer still won't qualify, the money put down and any rent credits earned will be lost, creating bad feelings for both the buyer and the disappointed home seller.
Buyers need to have a credible credit resource review their current situation and give them a fair estimate of how many years it will take to repair their credit enough to qualify for a loan, typically from two to five years.
Knowing this information before they look at available rent to own homes will help align the excitement and emotion of looking with the common sense of the needs of both parties. Will the seller allow a long enough lease period for the buyer to qualify? Maybe the seller can't wait; it's better to know that before you get too excited.
Once a buyer has found a home at the right price and on acceptable terms, the final key to a successful rent to own home sale is for the buyer to diligently spend that time straightening out the credit issues that are holding them back from qualifying for a loan.
It's very easy when you are living in the residence to forget that you are renters-in-transition and not the home owners during the lease period. Frequently rent to own home buyers will start to feel too comfortable and make big purchases or take financial risks that could effect their chances of qualifying down the road.
Finally, if there aren't any rent to own homes for sale in your area, look around at the For Sale By Owner or even traditional sales. There are plenty of homes just sitting on the market, and if you find one you really like, see how long it has been on the market. If the owners have been waiting for a long time they may be open to selling the home rent to own.
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