Please read through to the benefits of a rent to own. This can be a great opportunity for you Calvin
Basically, you are agreeing in writing to purchase the property in a specific time period( 12 month, 18 months) for a predetermined price. Generally, the landlord/Seller will ask for a non-refundable option fee up front plus the the first months rent. The non-refundable option fee can range from 1%-3% of the selling price. In this market I've seen as low as $2,000.00 +/-. You can negotiate the option fee and rent credit. Important negotiate an 6-12 month extension to the agreement in case you have an emergency and need more time.
As smart tenant buyer will ask for a rent credit back for each month the rent is on time. Rent credits range from $100.00 to $1,000/month. The rent credit and the non refundable option fee should be credited back to you in writing so it is clear when you purchase the property. Option fee and rent credit can be used as downpayment, closing costs, loan rate buy down etc. NOTE: lender tend to only allow rent credit that is in excess of fair market rent to be considered as down payment. So if you are paying market rent as determined by the lender and the landlord/seller is crediting you back $500.00/m very likely not all or any of the rent credit will be allowed. The landlord/seller could reduce the purchase price for disallowed rent credit. However, most buyers need rent credits as portion of downpayment.
IMPORTANT: As a buyer talk to a bank or lender before you sign the agreement. You want to make sure you will qualify for a loan before the end of the option to purchase. Ask the lender a what if senerio. We have found that lenders will lay out a plan so you can qualify later on. Example: if you do this Calvin... don't make any late payments for the option period especially to the landlord/seller, pay off you car, don't buy anything on credit, etc. then we could make a home loan for this much money. Interest rates will have a big impact on your ability to qualify in the future. Calvin, Follow the lender plan. This will provide you a goal and a plan to home ownwership.
Calvin, make sure your landlord/seller is the true owner on title. Call a title company. Ask for the research dept. Make sure landlord/seller is not behind in his payments to the mortage company or property tax. There have been a nunber of landlord/seller who have taken buyer/tenants money then hav the property foreclosured. As the Buyer/Tenant will lose your money and the property goes back to the bank. You must move.
Buyer/tenants are usually responsible to for repairs to the property. So do a walk thru your self or hire a property inspector. Remember, you are buying the home. You will not be able to renegotitate the condition later on.
Calvin, you will not be able to claim any federal tax write off's during the rent to own period
Finally, Calvin if you walk away or fail to make the payments that are due or do not buy the property during the lease period you will LOOSE all the rent credit and non refundable option fee.
I know this sounds like a lot of work. But, this is a GREAT way to home ownership while you get you credit and finances in order. Besides, it is tough to get a loan now during this mortage crisis. It can only get easier in the future.
Rent to Own Benefits.
1) live in you home today
2) building rent credit while living in your home
3) get your kids settled in schools
4) satisfaction of completing a dream
5) maybe build some property appreciation if home prices rise.
6) Make yourself proud
Calvin, I have leased many, many properties for myself and for others over the last 25+ years. You can do this and be gald you did. Go to our website if you need more help
Sincerely, Bill Fliflet
Thanks, Todd Norsted