Rentals in Fort Lee>Question Details

Adnurse, Home Buyer in Monroe, CT

Is there any such thing as an owner financing if we want to purchase a single family home in For Lee with 20% down or rent to own?

Asked by Adnurse, Monroe, CT Sun Apr 14, 2013

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Of course.

But let's separate the issues.

In owner financing, the owner serves as the bank. You put down as little or as much as the two of you agree on. Then there's a mortgage for the remainder. It might look something like a conventional mortgage--say 15 years at a fixed rate. Or it might be for a shorter term with a balloon note at the end. Example: You'd make payments as if it were a 30 year mortgage, but you'd have to come up with the balance--typically by refinancing--in 5 years.

With owner financing, you buy the house. The deed is in your name. Then you make payments to the owner.

With so-called "rent to own" (which is really a lease-option or lease-purchase--"rent to own" is a meaningless term), you do not get the deed to the property. The owner holds on to that. You rent the property for a period of time, usually with a portion of what you pay in rent being credited to your purchase price. Something in the range of 10%-25% is often the norm. Then you have the option (that's the option part of a lease-option) to purchase the property. Example: You might have 3 years in which to buy the property at a set price. At that point, you'd go out and get a conventional mortgage and buy the property from the seller.

Tip: Never, ever pay 20% for a lease-option. That's WAY too much. It's all negotiable, but something in the range of 1%-4% is pretty much the norm. Remember: That option fee is NOT a down payment. It's a payment to the seller for an option to purchase. Often, that amount is credited to the purchase price IF you buy. If you don't buy, you don't get it back.

If you can afford to buy today, then buy. If you'll be in a position to buy within 12 months, then wait and then buy. If you feel compelled to buy but know that you won't qualify for 2-5 years, then you might consider a lease-option.

Hope that helps.
0 votes Thank Flag Link Sun Apr 14, 2013
Don Tepper, Real Estate Pro in Burke, VA
another option is to find a hard money lender
0 votes Thank Flag Link Mon Apr 15, 2013
Well yes, it happens some owners do allow this type of financing but only if they can. It us not common and not many houses on the market has this option.
0 votes Thank Flag Link Sun Apr 14, 2013
Rent to owns are filled with problems and rarely ever work out. To make it work you MUST get a loan in a year or two or you LOSE all deposits and option money you put up. If there is a reason you can't get a loan now, why do you think you can in a year? Most people that can't now can't then either and then you lose money and start all over less the deposit you lost. Owner financing is not going to be as low as a bank is currently offering, so again why would you do it if you can get a loan and if you can't get a loan do you want to be paying someone 7-10% when your bank would offer under 4.5%?

Just rent and buy when you really can buy.

Good luck
0 votes Thank Flag Link Sun Apr 14, 2013
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