Rent to-own Homes: The Basics

RENT-TO-OWNHOMESTheBasics

JackieWoodward//TMG//780-433-8412//[email protected]

Rent-to-owncontractsseemtobemorefrequentoverthepastcoupleofyearsduetoeconomicconditionswhichpreventpeoplefromselling

theirhomesasquicklyastheywant.

Thisoptionisidealforinvestorsasarevenuepropertystrategyandforbuyerswhoareunable

toqualifyforamortgagerightaway.


RENT-TO-OWNHOMES:TheBasics

Therearerisksthataccompanyarent-to-owncontractforboththesellerandthe

buyer.

Continuereadingforwhatyouneedtoknowaboutrent-to-owncontractsfroma

>inancingperspective;



WhatisaRent-to-OwnContractandhowdoesitwork?



Arent-to-owncontract,orsometimescalledanoption-to-purchaseagreement,iswhererenterspaymarketrenteachmonthtoliveinaspeci>ic

property.

Attheendofasetperiod,usually1-3years,theyhavetheoptiontobuytheproperty.


Whatisarent-to-owncontractandhowdoesitwork?

Thebuyerandtheseller/owneragreeonapurchasepriceatthetimetheywritetheoriginal

agreement.

Thismeansthepurchasepriceisset1-3yearspriortowhenyouactuallyhavetoqualifyfora

mortgagetopurchasetheproperty.


Whatisarent-to-owncontractandhowdoesitwork?Whatisarent-to-owncontractandhowdoesitwork?

Ontopofthemonthlyrentalamountagreedupon,theseller/ownerwillcollectanadditionalamounttogotowardsyourdownpaymentwhen

you“close”ontheproperty.

Theseller/ownermayalsorequestaninitialdepositatthetimeyouenterintotherent-to-own

contract.



Makesuretoinquireifeitheryourinitialdeposit,orthemonthlyamountgoingtowardsdownpayment,isrefundableintheeventyoudon’tproceedwiththepurchaseattheendofthe

contractterm.



Ifyouareunfamiliarwithsomeofthetermsusedinthecontract,contactaprofessionalforguidance,whetheritbearealtor,lawyeror

mortgagebroker.

Alwaysbesureyouknowexactlywhatyouareagreeingtowhenyouenterintoarent-to-own

contract.



ADVANTAGESOFaRent-to-OwnAgreement



Ifyou’reabuyerwhocan’tqualifyforamortgagerightnow,arent-to-ownallowsyoutomoveinto

thehousenowandbuylater.

Thisgivesyoutimetoeither>ixyourcredit,accumulateyourdownpayment,ordowhateverelseyouneedtodoinordertoqualifyfora

mortgage.


Whatisarent-to-owncontractandhowdoesitwork?AdvantagesofaRent-to-OwnAgreement

Ifyouareasellerwhocan’tsellyourpropertyquickenough,arent-to-owncontractcouldeliminatehaving2mortgagepayments.

Yourrenterswillbecoveringyourmonthlymortgagepaymentontheproperty,andyou’ll

knowhowmuchyourpropertywillsellforattheendoftherent-to-ownterm.



DISADVANTAGESOFaRent-to-OwnAgreement



Thepurchasepriceissetatthebeginningoftheterm.Evenifotherhousingpricesriseorfallduringthattime,theoriginalagreed-uponsale

priceis>inal.

Iftheappraisaldoesnotsupportthevalue,therecouldbealimitonhowmuch>inancingthebuyer

isapprovedfor.



Allofthoserepairsthatusedtobesomebodyelse’sprobleminarentedpropertyoftenbecometheresponsibilityofthenewbuyer,evenduring

therentalperiod.

Ensureyouhavebudgetedforhomerepairsifyouarethefuturebuyerinarent-to-own.



Somerent-to-owncontractsarenotsuitabletoamortgagelender.

Theagreementmustclearlyoutlinethepurchaseprice,initialdepositamount,monthlyrentalamount,andamountgoingtowardsthedown

payment.



Andagain,itmustspecifywhetherornotanyofthoseamountsarerefundableshouldthecontract

notbehonoredforonereasonoranother.

It’salwaysagoodideatospeakwithamortgageprofessionalfamiliarwithrent-to-owncontractspriortocommittingtoalongtermagreement.



TIPSTOREMEMBER



Knowandunderstandwhatyouaregettingintobeforesigning!

Makesuretheselleriseducatedontheprocessbothofyouneedtofollowinorderforyouto

eventuallyqualifyforamortgageattheendofthecontractperiod.


Whatisarent-to-owncontractandhowdoesitwork?TipstoRemember

Makesurethepurchasepriceyouareagreeingtowillbeinyourpricerangewhenitcomestimeto

close.

Doyourresearchtoensureyouarepayingfairmarketvaluefortheproperty.



Ensuretherentalamountyouwillbepaying,notincludingtheextratowardsthedownpaymentcredit,isreasonableforthetype,conditionand

locationoftheproperty.



Beawareofwhattypeofrent-to-owncontractisrequiredandacceptedbyboththelenderandthe

mortgageinsurancecompany.

Talktoamortgageprofessionalpriortoselectingacontracttermtoensureyoucanqualifyforamortgageamountsuf>icienttopurchasethat

homewhenthecontractisdue.



Jackieworkswithbothrent-to-ownsellers/ownersandbuyers.

Helpingthesellers/ownerspre-qualifytheir

potentialbuyerstomakesurethecontracttermsaresuitedtothebuyersborrowingabilities.

Workingwithbuyerstohelpthem>ixtheircreditandbudgeteffectivelytoensuretheycanqualify

foramortgagewhenitcomestimetobuy.



JACKIEWOODWARD


MortgageExpertTMG&Mortgagegirl.caPhone:780-433-8412TollFree:866-932-8412Email:[email protected]:www.mortgagegirl.caFollow:@mortgagegirlca

Rent to-own Homes: The Basics

Real Estate

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