NMLS # 6395
Financing Kentucky One Home at a Time
Rent To Own is a better deal for the Seller than it would ever be for a potential Buyer.
The basic concept is finding a way to "force" savings towards a down payment by including a portion of the monthly rental that goes towards that savings. You pay your rent every month and your Landlord deducts a pre-determined amount to hold in a special bank account, called an "escrow" account. Your Landlord holds that money until you have saved up enough---through this "forced-savings" method---to meet a down payment to purchase the home.
The terms of the purchase price, including the down payment amount, and the amount to be set aside from the rental for down payment, are all set down at the time of lease signing.
It's all about helping the renter/tenant save up enough money for a down payment to buy a home (in this case, the one you're renting). But this is a better deal for the Seller because he gets to lock in a purchase price and a buyer today for a future sale.
Saving money for a down payment? Well, heck, you can do that on your own.
If you are dedicated to the idea of buying your own home, you can create your own savings plan to save up enough money for a down payment. And when you have saved up enough for a down payment, if that takes a year or two or more, YOU get to decide on the price you're willing to pay for the house at that time based on current market conditions. You won't be locked in to a price that may be a lot higher than what the house is worth in the future.
With Rent To Own you'll be locked in both to the house and to the price, even if it takes you 3 years to save enough through the forced savings of the rent payments. What happens if three years from now your life situation has changed? Maybe you need a bigger/smaller home. Maybe your employment has relocated. Maybe your credit or income is insufficient to qualify for a mortgage loan.
Find a way to save up on your own; not with Rent To Own.
Sit down with a local Mortgage Banker and get yourself prequalified, too. You may find you're better qualified than you think you are, and, if you're not, at least you'll know how much loan your income and credit qualify you for, and how much you have to save towards down payment and closing costs.
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Lease to own or Lease Option sounds good in theory but is rare in reality. This practice would allow a potential buyer to rent a home with a fixed price that they will pay for the home in the future. This is something that most Realtors would steer away from due to the potential liability. Let's say you rent with an option to buy for two years. For this scenario, let's say the home is worth $400,000 and you agree it is agreed to have an option in two years at $450,000. Two years from now you would have the choice to buy the home at $450,000 or walk away. Should the home be worth $600,000 you made a great deal and the home owners did not. If the home goes down in value you simply walk away. Either way the home owner gets the short end of the stick. Personally, I would never gamble with someone else's money and this is a gamble.
Tony Lewis RE/MAX of Valencia
-negotiate the lowest option price you can
-negotiate the longest lease you can
-negotiate the smallest deposit you can
-negotiate a portion of your lease payment to go towards the principle
-make sure you record your option at the county recorders office
Eddie W. de Leon
Senior Loan Officer
This home is already in Pending status (an offer has been accepted, so it's in escrow). However, if you're still considering a lease option, in addition to what my colleagues advised you, I would like to add that you have to be very careful with lease options because if you do proceed, you'll be paying monthly money toward your down payment, and if for some reason you won't be able to execute the purchase, you may lose that money.
Have a great afternoon and feel free to search for other available homes on my website, http://www.LilWest.com.
Glad to be of service!
These options normally emerge during buyer's markets when sellers can't unload properties.
RE/MAX of Valencia