generally speaking NO. I am not sure of the exact statisitic; however; I beleive it is close to 90% of people who do a rent to own do not buy the house they started out to buy. The reasons are many... I usually discourage clients form doing this for a variety of reasons.
First, you are putting up a non-refundable deposit for the house you want to buy. In addition the rent is usually inflated so that the seller can apply part of your rent to your down payment.
Second, you do not know what the future holds for you. What may seem like the right house now may not be in the future... People move everyday becuase of their needs change in regards to jobs, neighborhoods or the house they are in.
Third, you are limited in what you can rent to own. Most homeowners will nto do it. Thus instead of having a pick fo what you may want you have to choose based on what you can get. that home may not be the one you want.
Fourth, you are basing it on the fact your credit can be fixed in a set period of time. In most cases maybe. but you need to make sure you are dealing with a reputable mortgage broker that can tell you what you need to fix and help you get it fixed.
Fifth, on a lease option you are agreeing to a price for a house without knowing what the market is goign to bear in the future and usually have no negotiation power when the time comes up either.
Interest rates are constantyl changing and can affect the affordibility fo the house for you as well...if you are lookign to fix your credit and buy a house. I strongly recommend you get your credit fixed first then go look for a house to buy.
I wish you the best of luck with whatever you decide. If I can help you in any way, please let me know.
In my opinion, renting to own is not a good option. It, by far, is more beneficial to sellers having difficulties selling their homes than future home buyers. The same goes for rent to own companies. People tend to want things now and that's the whole premise of rent to own programs - why wait? You would be better served and it would be more economical to rent an affordable home, save as much as possible and repair your credit on your own instead of renting to own. Here is a link to a blog I wrote about those programs: http://www.nc-homeownership.com/archives/lease-purchase-program
I hope this helps.
1. The Credit rebuilding process you have undergone is working for you
2. The home you want to rent to own is the "right one" for you and your family.
This requires that you are working with at least 2 industry professionals you can trust.
1. Your Realtor (in order to be sure you get the right home)
2. Your loan officer (in order to be sure you get to the right loan to get to the right home)
Generally renting with the option to buy is not a good idea. It is especially true in cases where household income is under $70,000 a year or the home value under $200,000
Many rent options are based on your paying an up front non-refundable deposit and/or a monthly payment greater than "normal" rent, with the extra amount and deposit applied to the purchase price if you buy. When you buy, however, you may find that the purchase price is usually at or slightly above market rate and your options for financing are more limited than if you were buying some other property. Sometimes you discover after you move in that there are problems with the neighborhood or property that will make it so you never buy.
If you fix your credit, then buy, there will likely be more homes available for you to choose from and we can focus on properties that are priced below market values, then find the financing that works for you.
Here are some Trulia blogs to help you with credit and decide what direction to go.
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In the current housing market you can buy homes for thousands under market value if you create a strategy to posture yourself for this opportunity. If a home owner sells to you under a rent with option they are taking a huge risk that you may walk away - possibly leaving the house in less desireable condition. They will, therefore, require more money to cover their risk.
Please contact me if you need the name of a lender who will work with you to improve your credit posture and make you a candidate for the best possible purchase.
Blessings upon you...
Good luck and stay focused,
I would recommend just renting until you are currently ready to buy. Doing a rent to own or lease purchase can cost you quite a bit up front and typically you will pay more for the home rather than waiting and getting the home when your credit is right and you are financially ready to purchase, as you loose most of your negotiating power doing a lease purchase. It does work for some, but over all most fall apart. Short answer, just rent until your credit is right, then buy.
Have you concidered living as cheaply as possible and banking a down payment for a while.
Let me give you a couple of examples. (And please understand: I'm not "picking on" those who've provided these answers. I'm actually pleasantly surprised at the quality of answers on both sides, rather than a knee-jerk "It's a bad idea." It's just that there are ways to deal with these issues.) Example:
On a lease option you are agreeing to a price for a house without knowing what the market is goign to bear in the future and usually have no negotiation power when the time comes up either.
That's true. However, you build your negotiating power into the option. You might, for instance, agree to an extension of the option for another 1-2 years if the house doesn't appraise for the agreed-upon purchase price at the conclusion of the option. Or you and the seller might agree that if the value of the property isn't as high as the option price, that you'll pay for an appraisal and the seller agrees to sell the property to you at the appraised price. Or if the property fails to appraise, the option fee is refunded to you. There are other ways to address that concern, too. The important point is to agree on one and to include it in your option agreement.
You are putting up a non-refundable deposit for the house you want to buy. In addition the rent is usually inflated so that the seller can apply part of your rent to your down payment.
Yes, you are putting up a non-refundable deposit. That's the option fee. But it is buying you something very valuable: The right to purchase the property in the future for a set amount. Whether you choose to buy is entirely your own decision. As far as the rent being inflated, maybe yes, maybe no. It's all negotiable.
"in our market more than 90% of lease-purchases fail due to the tenants eventual failure to qualify for a mortgage at the end of the term. In fact, many investors understand that and use the L-P as a cash flow tool in that they never expect it to sell AND it typically gets them above-market rental rates with a tenant that has an ownership interest (treats the property better). If it sells then its gravy. If not, get another L-P tenant." AND "it is close to 90% of people who do a rent to own do not buy the house they started out to buy."
I've heard numbers all over the place--only 10% close, only 20% close, only 30% close. I'm not aware of any really solid numbers, though my impression is that about 35%-40% succeed. But maybe in North Carolina, it might be only 10%; I don't know, though I do know it is higher in other areas. However, Bill (who spoke about investors) raises an important point: Some lease-options are set up to fail. His scenario probably doesn't describe the majority of such arrangements (I don't think it does) but he's right about some of them. So the tenant-buyer really has to protect him/herself. Make sure the rent you're paying isn't greatly inflated. Make sure a reasonable amount (perhaps 20% or more) of what you're paying is being credited toward the purchase price. Make sure the option is for long enough (3-4 years) to give you a chance to clean up your credit. Those sorts of things. If you do those things, your odds will improve substantially.
If an owner is interested in selling their home that you are renting then at ANY time during the tenancy you can offer to purchase the home.
Yes, but you have no protection and no assurance that the owner will be interested in doing so. With a lease-option, you KNOW that you can buy the house. Further, you know what the price will be.
Sometimes you discover after you move in that there are problems with the neighborhood or property that will make it so you never buy.
Absolutely true. But the same thing can happen if you buy. At least with a lease-option, you CAN move. All you've lost is whatever option fee you paid at the beginning (and any extra rent you paid). On the other hand, what if you buy and then discover those problems? You're probably locked into that property for a long time with no way to get out of there. In fact, I'd argue that this is one of the big advantages of lease-options.
In the past, I've been pretty harsh about some of the criticisms of lease-options. The responses here, in contrast, raise good points. My point, though, is that the concerns that are raised here can be dealt with in a way that protects the tenant-buyer.
Hope that helps.