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!
Here's my advice about "RENT TO OWN:" Don't Do it!
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.
PowerHouse Solutions, Inc.
185 Great Neck Rd, Suite 240
Great Neck NY 11021
Licensed Mortgage Banker â€“ NYS Dept. of Financial Services
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1) I saw a situation years ago where the tenant did a rent to own. The seller never paid the mortgage and the tenant was evicted when the house went to foreclosure. So, their extra payments to build a downpayment went down the drain.
2) If you set a price before moving in and the price goes down, you'll try to renegotiate. If real estate prices go up, the seller will want to renegotiation.
In my opinion, it's much better and cleaner to negotiate a "right of first refusal." So when the seller wishes to sell, he/she will ask you first when it's time to sell the house.
Rent to own usually favors the seller.
Anyone who can and wants to, sells their home now, not down the road., so the seller may have financial issues you don't know about. Your selection of homes will be limited.
As far as how it works for you, the buyer..............well....
The sale price is decided now, not at the end of the lease term. Who knows how the market will be then?
The buyer is expected to give a deposit upfront that is NON-refundable.....that's right - you lose it if you do not purchase the house at the end of the term,no matter what the reason is.........so, if you can't qualify now for a loan, you better be sure you will qualify later, or you will lose that money
If you don't have a deposit now, you will be asked to pay an amount of rent OVER and above the normal rent.
Only that overage will be applied to the purchase price (contrary to what you may think, not all of the rent is applied - just the amount over the usual rent). If you do not buy, or cannot buy the home, you will lose that money, too.
This is a risky arrangement for a buyer who, most likely, is already weak financially.
Rent until you can save enought to buy in the normal manner, and qualify for a loan.
If you decide to try and go that route, make sure an attorney looks over the contract.... and make very sure you really understand what you're getting into!!!!!