Ashley Burr, Real Estate Pro in Loma Linda, CA

We closed on a short sale in November 2012. We would really like to buy a home and feel like we could afford around 400,000 mortgage but are unable t

Asked by Ashley Burr, Loma Linda, CA Sat May 11, 2013

find a lender who will write a loan right now because of our short sale. There is a home in our desired neighborhood where we might be able to arrange a rent to own situation. The owner is upside down in the house, lives in another state and seems to think the house is mostly a nuisance to him. It needs some work, which we would be thrilled to do. How would a rent to own situation work and would it be mutually beneficial?

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OH, you mean you sold your house as a short sale - that means you defaulted on the mortgage so other lenders will be worried about you doing it again. You will have to repair your credit for a couple years.
1 vote Thank Flag Link Sat May 11, 2013
Thanks for pointing that out. But that doesn't answer my question about a rent to own arrangement.
Flag Sat May 11, 2013
I apologize Ashley - I just saw that you were in California and I am of course in Colorado so am not sure why Trulia is sending this on to me as I requested only questions for Colorado - I still believe what I wrote may apply to you - again depending on whether you continued to pay your mortgage or not - you will need to find the right lender however to determine this. Many thanks once again
0 votes Thank Flag Link Sat May 11, 2013
No, you were right. We ARE in Colorado Springs. Our home that we short sold was in California though.
Flag Sat May 11, 2013
In the state of Colorado Realtor's are not permitted to write up a contract for rent to own situations any longer - the liability has been deemed to be too great - so you and the owner will be advised to get a real estate attorney to draw up the contracts - that does not mean you cannot use a Realtor for the rest of your journey which is highly advisable. Did you continue to pay your mortgage throughout the time period you were doing a shortsale - this will make a difference - if you did then it will take one year before you can purchase depending on your credit score and debt to income of course - so your time period revolves around whether you continued to pay your mortgage up to the closing date or not. Let me know - and we can move forward from there with a lender who can advise you.
0 votes Thank Flag Link Sat May 11, 2013
I think rent to own works well. The problem is that many people and agents have never done one and are scared of the unknown. So it is usually difficult to find one. But since you have identified one, the concern you should have is whether the home owner continues to make his mortgage payment while you ren his house. The advise of a strong contract is good.

Also, you were given some incomplete info from another agent. The waiting period is 7 years for a Fannie Mae or Fredie Mac loan. They do make some exceptions at 3 years for extenuating circustances like loss of job or death of a spouse,

The waiting period is only 3 years for FHA loans and 2 years for VA. So you do not need to have the "tough time" as was stated by that agent.

During this waiting period, be sure to address any other credit issues and get them fixed during your 2+ year break.

Please reach out to me if you need more info or help: Bernie McDonnell, (719) 659-9482
0 votes Thank Flag Link Sat May 11, 2013
Rent to own is a very tricky thing, and rarely works out for the buyer. It usually is more of a benefit to the Seller. I would try just renting it for now, and then work on repairing your credit, and saving $$ for downpayment. Maybe you could buy it in a few years. If you do go with a "rent to own" situation, I'd get a good attorney to write up the contract.
0 votes Thank Flag Link Sat May 11, 2013
You are now black balled from getting a loan for the next seven years. I have a house on the market where the owner would consider an Owner Carry. If the house is paid off, no lender involved, the owner can care the note. After six months or so, the note can be sold on the open market and the seller has his money.
You will have a tough time finding a rent to own with a closing date seven years from now.
0 votes Thank Flag Link Sat May 11, 2013
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