Professional Documents
Culture Documents
It doesnt matter how long youve $een renting" or how insurmounta$le your inan#ial situation may seem. The truth is" there are some little !nown a#ts that #an help you get over the hump" and trans er your status rom renter to homeowner. %ith this in ormation" you will $egin to see how you really #an&
Save for a down payment Stop lining your landlord po!"et # and Stop wa ting thou and of dollar on rent.
If youre like most renters, you feel trapped within the walls of a house or apartment that doesnt feel like yours.
to own pur#hase" 9: to /: will $e needed or a down payment. Step ,' Learn a-out rent to own and owner finan!ing This will $e one o the most important steps to ma!e sure you ma!e a sa e de#ision to rent to own or owner inan#e a home. ;any horror stories happen $e#ause o unin ormed or unedu#ated de#isions. There are a #ouple di erent types o rent to own or owner inan#ing options. Rent to own $asi#s Renting to own a home is the most #ommonly heard o type and #an also $e #alled lease option" lease to own or lease pur#hase. In a rent to own pur#hase" the $uyer signs a lease or rental agreement and an option agreement. The option agreement is what allow the $uyer to pur#hase the home. In the option agreement" a pur#hase pri#e and deadline to pur#hase the home $y is agreed upon. The option ee" whi#h is a non<re unda$le ee" is also set and is normally 9 to /: o the pur#hase pri#e. The rent and rent #redit is the last important part o renting to own. Rent #redit is the portion o the rent that gets put towards the pur#hase pri#e. The rent and rent #redit is also non<re unda$le. =earn more a$out how rent to own wor!s. Owner inan#ing $asi#s Owner inan#ing is the se#ond most popular option and usually the $est option or $uyers. Owner inan#ing is normally done with a #ontra#t or deed or land #ontra#t. Owner inan#ing is more li!e a traditional mortgage $e#ause there is a pur#hase pri#e" interest rate" down payment and loan length. It is di erent rom a traditional mortgage $e#ause the deed or title to the home is not trans erred to the $uyer until they ma!e all the payments" pay it o or get their own mortgage. The $iggest advantage o owner inan#ing over a rent to own pur#hase is that there is normally not a time limit or getting your own mortgage li!e with a rent to own pur#hase. Step .' Find a home 0inding the right rent to own or owner inan#ed home #an ta!e time and wor!. The !ey is not to get dis#ouraged. Besides loo!ing or rent to own homes or owner inan#ed homes on Bu$$a0inder.#om" the $est pla#es to ind a home are the #lassi ied se#tion o the lo#al newspaper" Internet Home =isting Sites" or sale $y owner signs and homes or rent. >ven i a home or sale $y owner or or rent is not advertised as a rent to own or owner inan#ed option" many times" the owner will #onsider it.
0inding a home #an $e easier $y ollowing step 9 and narrowing your sear#h. *uring this sear#h pro#ess" #he#! the #ondition o the home and ma!e sure there is no o$vious damage and everything is in good wor!ing #ondition. + home inspe#tion #an always $e done i you are unsure. Step /' Apply and negotiate pur!ha e + ter you ind a home that you li!e and the owner is willing to owner inan#ing or rent to own it to you" most owners will re?uire you to su$mit a $asi# appli#ation to them. In ormation that is usually as!ed or in#ludes #onta#t in o" employment in o and landlord re eren#es. %hen illing out the appli#ation $e sure to in#lude as mu#h a##urate in ormation as possi$le. I you s#hedule an appointment to see the home or meet the owner ma!e sure you are on time to show your dependa$ility. ;any people that apply or owner inan#ed and rent to own homes do so $e#ause o less than per e#t #redit. ;ost owners don,t rely too heavily on #redit or #redit s#ores. The most important thing is a relia$le in#ome that is at least ../ times the monthly payment li!e des#ri$ed a$ove and re eren#es. +ny other in ormation that #an show your relia$ility" a$ility to pay and
ta!e #are o the property should $e given to the owner to improve #han#es o $eing approved. Owner might $e unwilling to negotiate on the pri#e" payment" down payment very mu#h $e#ause they are o ering an easy way to wor! towards owning a home and the ease o $eing approved" even with $ad #redit. >ven so" it is always a good idea to as!. Step 0' 1mprove !redit and get approved for a mortgage Tal! to a mortgage $ro!er or lender and see how #lose you are to ?uali ying or a traditional mortgage. Here are a #ouple ?uestions to as!. How long do you thin! it will $e $e ore I #ould ?uali y( %hat pur#hase pri#e do you thin! I #ould ?uali y or( %hat would I need or a down payment and #losing ees( %hat should I do to improve my #redit( Ta!e what in ormation the lender #an give you and start to $uild your #redit. Besides ma!ing sure you pay all your $ills on time" here are a ew tips to start to improve your #redit. @onta#t your #reditors as soon as you !now you will have a pro$lem paying $ills on time. Try to wor! out a payment arrangement and negotiate with them to !eep at least a portion o the late notations o o your #redit reports. I your situation is serious" see a legitimate" non pro it t #redit #ounselor. #ounselor +void the s#am artists who promise a ?ui#! reversal o your #redit pro$lems.
option period e-pires the $uyer will lose all rent #redits and the option ee. Step 9. Reali)e that a home made availa$le via a standard lease may in#lude an option to pur#hase that home at a spe#i ied pri#e over a spe#i ied time period 5usually one or two years7. In order to a#?uire that option" the renter6$uyer must pay a one time" non<re unda$le" ee #alled the Boption #onsiderationB. The e-a#t amount is negotia$le" $ut it is usually ranges rom A./ to 4: o the pur#hase pri#e. A. Cegotiate a air #ontra#t that will #redit the $uyer 922: o that option #onsideration upon #losing o the sale. .. =oo! or a negotiated per#entage o all rent payments $eing applied toward the pur#hase pri#e o the home. Typi!al term and !ondition 9. Consider what you might e pect to find in a contract as follows! In order to re#eive a rent #redit o /2:" time is o the essen#e. You must pay your rent on or $e ore the due date o your lease 5typi#ally the 9st o the month7. This means it must $e re#eived $y the lessor 5landlord7 on or $e ore the due date. +ny payment re#eived a ter the due date will result in a 2: rent #redit or that month" a late ee may apply and you will not $e $uilding any e?uity. ;aintenan#e is the responsi$ility o the tenant $uyer. You are now renting to own" and home ownership re?uires maintenan#e. This in#ludes things li!e $ro!en windows rom stones or $ase$alls" #logged drains" peeling paint" $ro!en applian#es" $urnt out $ul$s" lawn wor!6snow removal" et#. I any ma'or repairs are re?uired to ensure ha$ita$ility" the owner remains responsi$le. You need to have Boption #onsiderationB. Option #onsideration is typi#ally A./: to 4: o the pur#hase pri#e o the home. It is a non<re unda$le payment" o whi#h 922: is #redited toward the pur#hase pri#e" whi#h $inds the lease pur#hase #ontra#t. A. "earn how this works by studying this e ample transaction!
Imagine a ni#e . $edroom" 9 $ath single amily home lo#ated in a near west su$ur$ o @hi#ago" in a great neigh$orhood with good s#hools and a strong #ommunity. It has $een reshly painted" #leaned" and is ready to move in. The pur#hase pri#e will $e 1A9/"222. ;onthly rent payments will $e 19"/22 and you will re#eive a /2: rent #redit 514/2 per month7. You
need $etween A./: and 4: in up ront option #onsideration. =et,s say your $udget allows or 1D"222 or option #onsideration. This e?uates to appro-imately A.3: 51D"2226A9/"2227. You will also need 19"/22 or the irst months rent or a total initial payment o 14"/22. EPlease note& Option #onsideration is not a se#urity deposit. It is a non re unda$le payment toward the pur#hase pri#e and is 922: #redited toward redu#ing the pri#e o the home.E Suppose you paid all your monthly rent payments on or $e ore the due date and you #hoose to $uy the rent<to<own home at the end o the 9A month lease pur#hase #ontra#t. You will have 19/"222 in e?uity $e ore you even own the homeF Here,s the math& =ease Pur#hase Pri#e < 1A9/"222 =ess& Option @onsideration paid at lease signing < 1D"222 =ess& /2: rent #redit o 14/26m E 9A months < 1G"222 Cet Pur#hase Pri#e a ter #redits < 1A22"222 You started with 1D"222 and $y paying your rent on time" your e?uity position grew 9/2: 5another 1G"2227 or a total o 19/"222 with 9A months. Cot a $ad dealF ;any people ind it nearly impossi$le to save 1G"222 in a year with all the #osts o living #onstantly on the rise. .. #ssure that this is a sound approach by getting it in contract form. Cow you may $e thin!ing" BOH" what,s the #at#h( This sounds too good to $e true.B +nswer" there is no #at#h. There are many possi$le reasons a landlord6seller may want to enter into a rent<to<own agreement. Some reasons may in#lude& Ceeds to maintain ownership or at least one year or tapurposes" 8na$le to get a air pri#e due to lo#al #onditions Tired o per orming minor maintenan#e. %hen one sells a home through a realty servi#e" a #ommission o /<4: is typi#ally paid. In the e-ample a$ove" this #an #ost more than the rent #redit. Sin#e realtors are usually not involved with this type o transa#tion" there is no #ommissions and the landlord #an a ord to pass along the savings to tenant6$uyer in the orm o rent #redits %hen the tenant $e#omes the tenant $uyer 5via rent<to<own7" there is an immediate sense o pride in ownership. Tenant $uyers add value to the #ommunity. They ta!e #are o their uture property" ma!e improvements" and eel good !nowing their rent money is wor!ing or them 5redu#ing the pur#hase pri#e7 rather than 'ust ma!ing their landlord ri#h. $. Consider the many advantages for the renter. Some in#lude&
Building e?uity toward home ownership Co $an! or inan#e #ompany involvement Poor #redit history may not $e an issue.
5 Little 6nown Fa!t That Can +elp You $uy Your Fir t +ome
The pro$lem that most renters a#e isnt your a$ility to meet a monthly payment. Ioodness !nows that you must meet this monthly o$ligation every .2 days already. The pro$lem is a##umulating enough #apital to ma!e a down payment on something more permanent. %ut saving for this sum doesnt have to be as difficult as you might think. Consider the following & important points! 9. You #an $uy a home with mu#h less down than you thin!. There are some lo#al or ederal government programs 5su#h as 9 st time $uyer programs7 to help people get into the housing mar!et. You #an ?uali y as a irst time $uyer even i your spouse has owned a home $e ore as long as your name was not registered. >nsure your real estate agent is in ormed and !nowledgea$le in this important area and #an o er programs to help you with your options. A. You may $e a$le to get your lender to help you with your down payment and #losing #osts. >ven i you do not have enough #ash or a down payment" i you are de$t ree" and own an asset ree and #lear 5su#h as a #ar or e-ample7" your lending institution may $e a$le to lend you the down payment or our home $y se#uring it against this asset. .. You may $e a$le to ind a seller to help you $uy and inan#e your home. Some sellers may $e willing to hold a se#ond mortgage or you as a Jseller ta!e<$a#!.K In this #ase" the seller $e#omes you lending institution. Instead o paying this seller a lump<sum ull amount or his or her home" you would pay monthly mortgage installments. L. You may $e a$le to #reate a #ash down payment without a#tually going into de$t.
By $orrowing money or #ertain investments to a spe#i ied level" you may $e a$le to generate a signi i#ant ta- re und or yoursel that you #an use as a down payment. %hile the money $orrowed or these investments is te#hni#ally a loan" the monthly amount paid #an $e small" and the money invested in $oth home and investment will $e yours in the end.
/.You #an $uy a home even i you have pro$lems with your #redit rating. I you #an #ome up with more than the minimum down payment" or #an se#ure the loan with other e?uity" many lending institutions will #onsider you or a mortgage. +lternatively" a seller ta!e<$a#! mortgage #ould also help you in this situation. D.You #an" and should" get per<approved or a home loan $e ore you go loo!ing or a home. Pr<approval is easy" and #an give you #omplete pea#e o mind when shopping or your home. ;ortgage e-perts #an o$tain written per <approval or you at no #ost and no o$ligation" and it #an all $e done ?uite easily over the phone. ;ore than 'ust a ver$al approval rom your lending institution" a written per<approval is a good as money in the $an!. It entails a #ompleted #redit appli#ation" and a #erti i#ate whi#h guarantees you a mortgage to the spe#i ied level when you ind the home youre loo!ing or.
7Con ider dealing only with a profe ional who pe!iali8e in mortgage or Rent to 2wn Propertie . 9nli ting their ervi!e !an ma"e the differen!e -etween o-taining a mortgage# and -eing tu!" in the renter rut forever. Typi!ally there i no !o t or o-ligation to There are many important i ue you hould -e aware of that affe!t you a a renter. 3hy on earth would you !ontinue to There are many important i ue you hould -e aware of that affe!t you a a renter. 3hy on earth would you !ontinue to en:uirer. Don;t lo e thou and -y throwing it away on rent when with your agent you !ould ta"e a few minute to di !u your pe!ifi! need o that you !an top renting and tart owning. Thi !onver ation !o t you nothing. And# of !our e# you houldnt have to feel o-ligated to -uy a home at the time you review thi . $ut -y ta"ing the time to e*plore your option # and learn a-out the way you !an afford to -uy a home# thin" how prepared and rela*ed youll -e when you are ready to ma"e thi important tep. 7