Rent vs Buy in 77070>Question Details

Kgutierrez, Other/Just Looking in 77070

For someone like myself who has bad credit but would like a home, what would be the best option: a rent to own home or buying a more affordable home?

Asked by Kgutierrez, 77070 Thu Jun 14, 2012

For example, if I would like to buy a more affordable home, it would have to be a home of less than $90k so that my boyfriend and I would be able to afford it. I know that buying a home now is more complicated.

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Ron Rovtar’s answer
Hi Kgutierrez:

There are some good answers below that offer arguments for both of the options you mention. But no one really knows exactly your situation. So you almost certainly should talk to one or more trusted advisers. A good place to start is a HUD-approved counseling service (link below). This will be a free service. Don't go to anyone who wants to charge you money.

Your second step should be to talk to a mortgage broker who is willing to work with you over a longer term. The broker can look at your credit report and offer specific advice about improving your score during the short and long terms. Sometimes you can have a significant impact on your credit score by simply having items removed from your report because they don't belong there.

If you are interested in some of the basics about credit scores, you can look at this blog post in which I have compiled advice from a number of good sources. This was written a while back, but I don't think much has changed. http://www.trulia.com/blog/rovtar/filter/category/Credit_Score/56

At any rate, once you have more information, you will be in a much better position to make the best decision.

Good luck!

Kind regards,
Ron Rovtar
Prudential Real Estate of the Rockies
303.981.1617
ron@rovtar.com
http://www.rovtar.com
0 votes Thank Flag Link Fri Jun 15, 2012
I really like rent-to-owns (unlike Al), but I totally agree with him that it's the wrong choice for you. If you can afford to buy, then buy. It's that simple.

If you can't afford to buy conventionally, then Lucie's suggestion of owner financing is good.

The difference, to greatly oversimplify, is that with a rent-to-own, the seller retains ownership of the property until some future point. With seller financing, you own the property from Day 1.

But: Lease-options and rent-to-owns are almost impossible to do in Texas . . . unlike the other 49 states. There are very strict laws on the length and other restrictions that really make lease-options almost unworkable. There are ways to address those issues, but they're pretty complicated. (Having the seller create a trust, putting the house in the trust, then becoming a beneficiary of the trust . . . for instance.)

Another red flag: It's you and your boyfriend. Not you and your husband. It's not that buying becomes impossible, but it's more difficult and you absolutely have to have agreements in place about what happens if the two of you no longer are a couple. Kind of like a pre-nup agreement.

So, particularly in Texas, if you want to buy, then buy. But have a lawyer address the ownership issues and what happens to the property before you buy it.

Hope that helps.
2 votes Thank Flag Link Fri Jun 15, 2012
Don Tepper, Real Estate Pro in Fairfax, VA
MVP'08
Contact
I would say a rent to won could be a good option for you till you get your credit issues cleared up and scores in a better range to get lower interest rates.

1) Start doing your home work on fixing your credit, hire a great company if you have to help.
2) Talk with a mortgage broker to see where you stand on buying to rent to own and on buying options, make sure you can qualify before you get to far ahead of yourself. You don't went to walk in with your eyes closed to find out later it won't happen....
3) Pay down debits, don't buy/lease a new car, or take out any loans.
3) get some credit cards if you don't have any only put small amounts of money on them each month and pay off balance as soon as bill is cut.

Hope this helps
0 votes Thank Flag Link Fri Jun 27, 2014
Exceptional advise again from:
Don Tepper, Agent, Fairfax, VA

Rent-to-owns and Lease/options are incredible opportunities...for the owner to make lots of money. Very few, actually NONE of which I am aware, EVER become owned by the potential buyer. These buyers exit the situation much poorer than when they entered. Don't become a victim of your impatience. There is one exception to this option that IS beneficial, but we would need an off line conversation for that. Good down payment required.

'For someone like myself who has bad credit...'
You already know what you must do. So get to it.
Use the resource below to identify the best resource for repairing your credit.
You will be able to identify those lenders in your area who grant loans to local buyers and small businesses. These folks will work with you to get you into a home buying status.
Here it is:
http://www.BankingGrades.com
Enter your zip. You will find 2 rated "B' and of course "F" for Citi, Wells Fargo, Bank of America and Chase.
Give the 'B's" a call and set up an appointment. By this time next year, you will be able to buy. Don't be robbed!
PS: When it comes time to buy, don't be a bandit, do business with those who are supporting your community.

Best of Success in getting on the road to recovery,
Annette Lawrence, Broker/Associate
ReMax Realtec Group -
http://www.FloridaRealestateMadeEasy.com
727.420.4041
0 votes Thank Flag Link Fri Jun 15, 2012
If your credit will allow you to buy a home a home of less value than you would like, I think you should buy. Pay o time and continue to repair your credit. Within three years, you will have a mortgage of three years + a more repaired credit. A lease purchase is usually not your best option. The seller could not sell it for some reason, do you want to own this home that you might want to sell down the line? Again, if you qualify for a loan, even it is a small loan, I recommend that. Call me if you have further questions. If you are in the NW or NE part of Houston, I would love to help you
0 votes Thank Flag Link Fri Jun 15, 2012
Neither! Trust me on this one, rent to own is not what you expect and can be difficult to refinance when the time comes. Be sure to have the loan officer you intend to work with later outline the current guidelines where these transactions are concerned, an underwriter does not usually agree with the terms of the contract when it comes time for the buyer to cash out the seller.

Everyone I have spoken with in the last 3 years that have entered into a lease option lost money on the deal. Note that I said everyone! I have not met one winner in the last three years that have done this as a “buyer” only the sellers came out ahead if there was a winner at all. It is a hot topic these days because so many people do not qualify to buy a home right away because of a recent credit issue. That is why so many people are being taken advantage of when they can afford it the least. Some insight contained in the link below, hopefully it will keep you from getting hurt financially. Good luck,
0 votes Thank Flag Link Fri Jun 15, 2012
Hi, It depends on why your credit is so poor. I would recommend renting and working on improving your credit. This way you can purchase what you want, not what you would have to settle for.

Chris
0 votes Thank Flag Link Fri Jun 15, 2012
I can think of nothing worse than a rent-to-own scenario. There are few if any available properties (owners would rather cash out than hold on to the homes for any length of time, especially one priced as low as your budget requires). Realtors in Texas are not permitted to participate (an attorney is required, along with two distinct contracts ... one for the lease, the other for the sale), you'd have to qualify for a mortgage at some time (generally in a few years), and only a portion of the rent would be applied toward the down payment, requiring you to come up with a significant amount of cash. There are numerous discussions about rent-to-own purchases here. Please take the time to read the forums ... you'll get a better idea as to why they're as bad a deal as they are.

A relatively small number of properties are available on an owner-financed basis. However, you'd need at least 20%-25% down, the interest rate would be higher, and you'd have to qualify for a mortgage to pay off the owner (this is known as a "balloon"), generally in three to five years. Once again, it's not a viable option for most people.

You'll need a FICO score at least in the low to mid 600's, in addition to about 6% to 8% of the purchase price (including a 3.5% down payment) in order to even consider buying a home. Employment and rental histories are also considered. From what you've written, it appears as if a home purchase is a bit down the road for you.

Your first step is to improve your credit ... and don't fall for those "credit repair" pitches. You can do anything they can, without paying some outrageous fee.

I've worked with many first-time buyers on limited budgets. If I can provide you with additional information, or address any questions or concerns, please feel free to contact me at (713) 213-6350 or ... al@algeffon.com. I wish you well.

Al Geffon
0 votes Thank Flag Link Thu Jun 14, 2012
I'm glad I was able to clear things up a bit for you. It likely wasn't what you wanted to hear, but it's better to be aware of your situation than to get your hopes up, only to be disappopinted once again. Hopefully, you can eventually clear the air as to why your credit is less than favorable. Keep plugging away ... it will happen for you. Keep my name and contact information on file. I'll be glad to try and help in any way I can. And if you know anyone looking to buy or sell a home, I'd love to help them. Best of luck ... stay in touch.

Al Geffon
Flag Thu Jun 14, 2012
Well thank you, no one has broken it down to me like this before. Even when we tried to purchase a house with my in law they did not explain it to me like this. I have worked on trying to improve my credit but then I was a victim of a scam earlier this year and I feel like I'm going backwards in my credit situation.
Flag Thu Jun 14, 2012
Define bad credit!

Your best bet might be to work on the credit.

I give free credit consultations.
Email me and I will reply with a free e-book about credit.
We can go from there.

Good Luck
Tom


Tom Burris
Mortgage Banker
DallasLoanGuy.com
(214) 763-4629 cell/text/nights/weekends(Really!!)
tomburris@dallasloanguy.com
Lending all across the entire Great State of Texas!!
NMLS# 335055
Search Dallas area MLS for FREE. No registration => http://www.ntreisinnovia.net/cgi-ntr/BR_login?0501134
0 votes Thank Flag Link Thu Jun 14, 2012
If you have a good sum for a down payment, owner financing may be an option for you. Let me know if you are in that position.
0 votes Thank Flag Link Thu Jun 14, 2012
Define a good sum for a down payment? The best we could probably put down at the moment would be $4k. And thank you for your help.
Flag Thu Jun 14, 2012
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