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david.leach, Home Buyer in Rancho Cucamonga, CA

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Asked by david.leach, Rancho Cucamonga, CA Mon Sep 10, 2012

Hi another question for the board. I am looking for answers on the following:

1. With the banks so tight on the lending is it better to lease/rent to own a home and if so how do I find the companies that are not out to scam me?
2. What are the current rules on a VA assumable loan?
3. With all of the homes that are on the market either foreclosure or short sale, are there programs or sellers out there that I can work with and just save their home and credit or would that be considered lease/rent to own?
Thanks
Dave

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Good rule to follow for "lease to own" -- if the seller/optionor offers you to "rent to own" a home at an unbelievably low price -- don't go for it.

There are typically 2 contracts to this type of transaction:
1. The rental agreement -- typically 2-3 years. Expect rent to be above market rent.

2. The option agreement -- executory for same amount of time as the rental agreement; has provisions of how to exercise your option to purchase. Part of your monthly payment should go towards building your downpayment. A very skilled agent will be able to write such a contract to make sure your credits are protected.

Both agreements are not necessarily independent or dependent of the other.

The option fee is nonrefundable.

You have to be careful of how this will really work and who are dealing with. What if a dispute arises between multiple owners of the property you are doing "lease to own"? What if the payments you made to the optionor never went to the bank to pay the mortgage?
0 votes Thank Flag Link Wed Oct 17, 2012
Good info below - Always speak to a reputable mortgage lender for financing advice before getting in too deep - Good luck!
0 votes Thank Flag Link Wed Sep 19, 2012
Rookie:

I would suggest that you talk to a lender to find out what you need to do in order to prepare yourself to purchase, either now or in the future. They can also tell you about the rules for VA assumable loans, but it is my understanding that you would need to qualify and bring in the difference as to what is owed and what the sale price is. With the low interest rate now, assuming another loan may not be the best option.

Since on a foreclosure the bank owns the home, it would be a purchase. Unless you have enough cash to purchase the home on the courthouse step on the day of foreclosure.

In my opinion leasing to own is not a good option (it usually is only a good option when homes are increasing substantially, and that isn't the case now. I would suggest that you lease with first right of refusal, which means you have the first option to purchase the home, if the seller decides to sale. Usually what ever is put towards the purchase is an additional amount that it would rent for. Example if the home would rent for $2000.00 then your rent might become $2200.00 and the $200.00 is put toward your purchase, so you can see that it would make more since for you to save money and have the first right of refusal, then you have control over your savings and if you decide not to purchase or if you cannot purchase at the time they are willing to sell, then you don't loose the extra money.

Diana Margala 909-560-0145
Web Reference: http://www.dianam.com
0 votes Thank Flag Link Wed Sep 19, 2012
Rookie:

Banks are not as tight as you think they are. If your credit score is under 620, then that may be the case.

However, there are many first time homebuyer programs for 'Rookies'.

A VA loan would be as difficult to assume as any other loan. You would need to come in with the difference between the current mortgage amount and the purchase price of the property.

Before you get into a lease to own or a take over payments, I would urge you to get yourself with a lender and have yourself assessed and preapproved for a loan. You may be better off than you think.
0 votes Thank Flag Link Mon Sep 10, 2012
The reason seller's do short sales is because they have to sell and owe more than the house is worth. I don't recommend paying what a seller owes to get them out of the short sale because you would be paying to much for the house more than likely and an appraisal would be an issue if you are financing.
In terms of lease to own you usually lease the house and then have first right of refussal to buy the property at the end of the lease. Otherwise you agree on a price and start to lease to own but what if the house isn't worth what you agreed to up front? It would be a problem.
Inventory is tight in a lot of areas. I would start with a local Realtor in your area that can answer your questions being area specific.
Good Luck.
0 votes Thank Flag Link Mon Sep 10, 2012
The decision to lease or rent to own is personal to your own finances.

How do you find reputable companies? Talk with local full time real estate agents.

Call a lender who provides VA loans and find out their current rules.

Each home owner and lender is different so it would be difficult to provide a program for buyers to "save" the sellers. I have a long answer for this, but I'll be brief. Basically, if the seller can't pay the amount you would pay would be above market rent.

Lease Rent to own. This is a two contract transaction. The first is the lease. The lease states what you will pay each month, how much of your rent will go towards the mortgage, what amount up front will be your option money. Option Money goes towards the purchase. If you fail to exercise your option you loose that money. Usually the seller wants a substantial amount of option money. Risk to you is that the seller fails to pay their mortgage, taxes, insurance and you end up with nothing.

The second contract is the purchase how much you are offer to buy the property now, which you will purchase in the future, usually one or two years. If the prices to up the seller has to sell to you at the agreed price, if the price goes down you don't have to purchase but you forfeit the option money.

Of course everything is negotiable.

Have an amazing day!
Web Reference: http://www.terrivellios.com
0 votes Thank Flag Link Mon Sep 10, 2012
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