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.
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Sandra Gold - Realtor
While rent/options are scarcer than meteorite fragments, you are most likely to find them among rental homes because those owner are not in a hurry to sell.
In order to ultimately purchase your West Palm Beach home, you will need to find an owner who is willing to wait 2 to 3 years for you to clean your credit or accumulate enough for a down payment.
Someone selling a home in West Palm Beach is looking to close with 30-60 days. So this type of owner is highly unlikely to consider a rent/option.
If you enter into this type of arrangement to purchase a West Palm home, the owner is likely to ask you for a non-refundable deposit. That deposit will allow you to exercise your option to purchase within a certain period of time, usually two - three years.
During that time you will need to accumulate a sufficient sum to use toward a down payment, clean up any credit issues you have, and prepare yourself to purchase either for cash at the end of the option, or to obtain a mortgage when it is time to exercise that option and purchase.
If you're wondering why you'll need a mortgage at the end of the time period, it's because you are obligated to purchase (or lose your deposit) when the option terminates.
So, unless you are prepared to pay extravagant amounts each month to the owner during the 24 to 36 months you are renting, a mortgage will be a necessity.
For example, let's say you're renting a 2300 square home in West Palm Beach and paying $2500 per month in rent. Well, that's $30,000 per year. All rent, and all gone.
Okay, let's say you want to purchase that home over a 36 month period of time and the cost is going to be $275,000 when the option expired.
You have a couple of ways to do this: One, and the most common, is an advanced deposit up front, then a mad rush to save every penny over the years and fix your credit so you can get a mortgage.
Two, you have given your deposit up front (and this deposit will be credited against the deposit you will have to make when you purchase) and you pay money above the rent each month. These additional funds are also credited toward your eventual downpayment.
But, like the original deposit, they will be forfeited if you are unable to or choose not to exercise your purchase option.
With that information in mind, you may want to talk to a mortgage broker before you start searching for rent/option homes. (Call Preston Ware, mortgage broker, at 561-329-0075. He may be able to give you the answers you need.)
That way, you may get an idea of how much house you can actually afford now, as a renter, and later, as a buyer, assuming you are able to qualify for a mortgage at the proper time.
Marc Jablon, The Jablon Team
Re/Max Complete Solutions
My name is Bruce Devlin I am a real estate agent with Cobblestone Realty, LLC. I would love to help you find a place that you can rent and have a option to buy in West Palm Beach. You can reach me by email or phone. I look forward to hearing from you.
"Good is the Enemy of Great" - Jim Collins
1203 Jupiter, FL 33458
Cell: (203) 804-0112
Office: (561) 429-3340
Fax: (561) 429-5872