Home Buying in Sacramento>Question Details

Amelia, Home Buyer in Sacramento, CA

What exactly does the term "Rent to Own" mean.?

Asked by Amelia, Sacramento, CA Sun Feb 10, 2013

My home is currently in a short sale. I am in the process of looking for a rental. I see all these ads for homes for rent w/lease option to buy. What exactly does that mean and are there any trusted companies in the sacramento area that deal w/lease option to buy?

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Answers

11
VERREOS, Tony’s answer
Amelia:
Lot sof good advise for you here:

Michelle says "approach with extreme caution" to me that would me DO NOT approach without a really good real estate attorney who will guide you.

Ron listed out a number of the types of Q's that the deal's agreement would have to answer in your
favor before your attorney or your realtor would suggest you proceed with it.

Joe posted a link to the How stuff Works. Very considerate of him.

Remember what Mick Jagger said: You don't always get what you want. You don't always get what
you want. But if you try real hard - sometimes - you get what you need!

Be really careful as the others have all said.

Tony
0 votes Thank Flag Link Sun Feb 10, 2013
Rent to own means you are renting a home. The landlord allows you to put a portion of the rent payment towards down payment. At some point you will have to get a mortgage to complete the deal. Usually the rent, the interest rate, or the price of the house will be higher on a rent to own home
0 votes Thank Flag Link Wed Mar 6, 2013
Absolutely there are. I do know quite a few knowledgable individuals within Sacramento that could be of assistant. If your credit is not good enough they work with you to get your credit to a poin of purchase. Please feel free to contact me for any information.
0 votes Thank Flag Link Sat Feb 16, 2013
I see I went on too long and the rest of my info didn't make th thread. Here's the remainder:

2) Speak with a mortgage professional. Just have a conversation. Don't feel like you are committing to them just because you are speaking with them. I have listed three referrals whom I work with and recommend often. Any one of them would be happy to educate you on the purchase process, help explore your purchase options, and guide you through it.

Cedric Cedric Washington
Mortgage Banker
NMLS# 841002
Cherry Creek Mortgage Company
5751 Sunrise Blvd.
Citrus Heights, Ca 95610
916-517-8842 DIRECT
916-864-3988 OFFICE
866-422-5820 FAX
email: cwashington@ccmclending.com
http://www.cedricmwashington.com

Kelly Redmond
Partners Mortgage
1687 Eureka Road, # 100
Roseville, CA 95661
Office: (916) 960-0368
email: kredmond@partnersmortgage.com
http://www.partnersmortgage.com/KRedmond/
0 votes Thank Flag Link Sat Feb 16, 2013
It is either a purchase contract with a leasing clause or an rental contract with a purchase option.

Check out Investopedia's site, link below for a good write up on the subject.

http://www.investopedia.com/terms/r/rent_to_own.asp#axzz2L56L1yqS

Hope this helps
0 votes Thank Flag Link Sat Feb 16, 2013
Amelia,

My colleagues are right. When you see the term "rent-to'own" it is no different than the store "Rent To Own" - the "renter" will end up paying an overly obsurd amount for the item which they are renting-to-own in exchange for having it now. In those stores, you will find furniture priced at $500, but by the time you've paid for it in full you've paid four times the original price.

Ask yourself "why would I consider a rent-to-own scenario instead of the tried and true method of home buying?" Is it because you'd like to own a home but have very little to put down and your credit is not the best? Let's look at some home buying minimums.

- minimum 680 Fico
- minimum 3% savings toward the total purchase price (more is better but there a programs which will assist you if you have at least 3%)
- more than two years on the job

I am sharing with you the minimums, but consider also that the best case is to have more in cash reserves for things like inspections, appraisals, and other purchase contingencies. In addition, having a cushion of cash reserves (three to six months of your mortgage in savings) should also be another goal to provide you a sense of future security. It's not necessary for the purchase, just an overall goal

People are often taken advantage of in rent-to-own situations (sometimes even referred to as lease options) because of their own personal situations (bad credit, limited income, etc). However, there are wiser solutions if a person is willing to do the work and exercise patience, and you don't need to have a 700 FICO score or $20,000 in the bank (although both would be nice).

Preparing a firm foundation upon which to purchase will set you up for a great homebuying experience and position you to be in your home for years to come. So let's start with the basics of home buying. Even with little down and not so good credit scores, this should be your minimum goal. Be relentless, until you get here, do not be detered by any other method of attaining your goal of buyer a home:

GET EDUCATED/BUILD A TEAM OF SUPPORT SPECIALISTS:

1) If your credit is an issue, talk to the good folks at Blue Water Credit: http://www.bluewatercredit.com/
They also have some very good article right on their site that deal with credit restoration.

2) Speak with a mortgage professional. Just have a conversation. Don't feel like you are committing to them just because you are speaking with them. I have listed three referrals whom I work with and recommend often. Any one of them would be happy to educate you on the purchase process, help explore your purchase options, and guide you through it.

Cedric Washington
0 votes Thank Flag Link Sat Feb 16, 2013
Ron and my other esteemed colleagues are right. A lot of times, tenants would pay too much in a lease option (premium). Even assuming that seller is honest, usually the option does not get exercised,
because the purchase price is too high, or whatever other reason, hence you would lose this premium.

There is a company called waypoint homes, which is essentially a hedge fund investing in foreclosed properties and then rent them out with an option to buy.

BTW, I am not affiliated nor recommending them in anyway, I am just mentioning this for your further research.
0 votes Thank Flag Link Thu Feb 14, 2013
Amelia...
It should be known as "approach with extreme caution"
Rent to own typically only benefits one person - the Seller/Owner.

My best suggestion would be to find a realtor to walk you through the process of buying your own home. Your realtor will put you in touch with a lender who can provide you with options, advice, and get you prepared to make a home purchase.

Today there are multiple programs to get you into a home with very little money down.

My best advice...stay away from "Rent to Own"
0 votes Thank Flag Link Sun Feb 10, 2013
It means you pay too much for a house. The seller prices the home too high ("the cost of doing business") put down "option money"--or a "down payment", pay monthly payments (rent), and are expected to finance out of the lease / option purchase scenario in a few years--paying off your purchase with a loan you obtain. If you can't get a loan to finance out of the lease option (rent to own) due to your short sale, then the seller can keep your option money and not renew your lease, and that's that. You are done with that house and lost money. It's a bad way to "buy" a house. Your best bet is to truly ride this out, work on your credit repair, and try again in a few years--buying a home the "old Fashion" way. If you search the Trulia site, you will find volumes of comments from us regarding this rent to purchase scenario, and how bad a deal it is for buyers.
0 votes Thank Flag Link Sun Feb 10, 2013
Lease/Option
You are desperate!
Your Credit or Finances, or both, will not allow you to go the conventional route:
You need the Seller to help you out!

The Seller will know it, and you are going to pay dearly for this service:
There aren't too many altruistic Sellers out there.

There is no FORM printed by anyone; there are just too many variables.
The terms that can be written into a Lease/Option can be dangerous to you:
How long is the Option period?
How much money are you putting in to the Option?
What happens if you are not able to execute the Option?
How do you know what your financial situation will be 2-5 years from now?
How much is the rent in the meantime?
Who will be responsible for maintenance and repair in the meantime?
What will be the Market Value of the home in 2-5 years?
What will be the Selling price 2-5 years from now?

This is the Ultimate Caveat Emptor!

Good luck and May God bless
0 votes Thank Flag Link Sun Feb 10, 2013
It is like a car, you can lease it with the option to buy after a certain amount of time. Here is an article on them that goes into further detail...
0 votes Thank Flag Link Sun Feb 10, 2013
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