Can you advise if a rent to own a home is the right move for someone with a low credit score and bad credit? How doI go about finding an agent?

Asked by Figch1217, Queens, NY Sun Jul 3, 2011

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Susan Chen, Agent, North Babylon, NY
Tue Jul 12, 2011
Good Morning,

It all depends so there is no true right or wrong answer to your question. It depends what you can afford and you need to have full disclosure from the owner that's offering the property.Then you can better make an educated decision on what's right for you and your family.

I would advise before you get into any situation you have an agent or attorney educated on the topicto help you and read everything and understand it before you sign.

I'm available if you would like to talk further on the topic.
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Mack McCoy, Agent, Seattle, WA
Sun Jul 3, 2011
Generally speaking, I would say, No! As Don says, it's a good idea for some people under some circumstances.

Here's the thing - most people I run across with a low credit score and bad credit aren't just unlucky, they simply haven't developed good credit habits. They always spend more than they make, they're slow to pay their bills, and they're generally irresponsible with money.

That's not the worst thing in the world, unless you're trying to get into training to take on a thirty-year mortgage. I like to think of having bad credit as being out of shape or having bad eating habits - it's something that you can change, if you want to, but you have to start out small and not expect to run a marathon after two weeks on a treadmill.

So if you're the person who has never developed good spending habits, don't go renting-to-own or taking on any long-term financial obligations. Improve your spending habits, clean up your credit, pay down your credit cards and pay your bills on time . . . the way you'd train for a marathon, start with short jogs, gradually build up to where you have the credit and savings so that you don't have to settle for some house that a guy couldn't sell on the open market - you can pick and choose once you have strong credit and healthy savings.

And if not, then, it applies to any reader who fits the bill!

All the best,
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Don Tepper, Agent, Burke, VA
Sun Jul 3, 2011
It might be. Or it might not be.

Sorry for the ambiguous answer.

I'm a big advocate of lease-options/rent-to-owns. But the conditions have to be right.

Based on the points raised in your question, the answer really depends on whether you're able to clean your credit it up and how long it'll take. For some guidance on that, see a mortgage broker. Get some idea of what's showing up on your credit report and a realistic idea of how long it can take to correct. The next question, logically, is: Can you do it? Are you prepared to take the steps needed to clean up your credit? Remember: At the end of a lease-option, you're going to be going out and getting a conventional mortgage. So, at that point, you'll need good credit.

A few general tips: The lease-option should be for a minimum of 2 years. Perhaps more, if it'll take longer to clean up your credit. (If the mortgage broker estimates 2 years, then go for an option of at least 3 years. You need to build in some extra time both as a security measure and to make sure that the steps you've taken ripple through to your credit report.)

You want an agent familiar with creative financing. Probably one who works with investors--not that you're an investor, but you want an agent who's flexible, open-minded, and creative.

Also, make sure that a lawyer reviews all the documents. Again, you want one who's used to working with investors. There are plenty of so-called real estate lawyers out there who don't know the first thing about lease-options and rent-to-owns. And there are plenty of ways a lawyer can protect you. For instance: (1) By including a clause allowing the extension of the option for an additional year upon payment of a fee from you; (2) By including a clause specifying what happens if the property fails to appraise for the value specified in the option (a number of possibilities there, from reducing the sales price to the appraisal price to extending the option period, and more); (3) By including a clause that will allow you to determine whether the seller is making his mortgage payments on time (you don't want the property you're planning on buying to go into foreclosure), and more.

Start by calling real estate companies in the area you hope to buy. Speak to the agency's broker. Explain what you hope to do. Say that you've been advised (by me) that it's likely that an investor-friendly agent may be best prepared to assist you; what does he think? You'll find that opinions vary widely on rent-to-owns. You may run into a broker who says that he doesn't let his agents do those deals at all. Some don't. That's fine. Just call the next agency on your list.

Finally, here's a link to a blog I wrote on how to find rent-to-own homes. It may be useful to you or to whichever agent you select:

Hope that helps.
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