Rent/lease to own options in the NW Austin area (Cedar Park, Leander, Liberty Hill) ?

Asked by polvado1, Round Rock, TX Sun May 19, 2013

We can't but now since we just dealt with a foreclosure and had a Chapter 7 bankruptcy discharged recently. Rent/ lease to own seems to be our only option, especially since we are trying to manange on just my teacher salary (i.e. difficult to save up a down payment). The ideal would be an older ranch style on an acre or two in the general area we are in now. Any feedback and options are greatly appreciated.

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4
, ,
Thu May 23, 2013
Good morning polvado1,

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.

Trevor Curran
NMLS #40140

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3 votes
Don Tepper, Agent, Burke, VA
Sun May 19, 2013
The state of Texas severely limits the ability of owners or investors to do lease-options with tenant-buyers. Consider, instead, some other possibilities, such as straight owner financing.

Check with a good Texas Realtor for more information.

Hope that helps.
1 vote
Shane Petty, Agent, Austin, TX
Tue May 28, 2013
Hi Polvado1,

Trevor makes some very good points about coming out of foreclosure, and the problems people face when finding housing. One thing I would add is to be wary of all the financing tricks and pitfalls. There are tons of people out there just waiting to take advantage of people in your position. Find some free legal advice on any contract before you sign anything. At a minimum have, a Realtor go over the contract. They can't provide legal advice, but can explain some of the pitfalls.

As Trevor said there really is no quick and easy fix. You have to work to rebuild your credit ratings. Once there, you can find down payment assistance programs to help with that. There are some gotchas with those, of course, like having to stay in the home for a number of years, but will really help if you want to establish a more permanent situation you can live with.

Best of luck, and tread carefully!
0 votes
Katrina Cott…, , Austin, TX
Wed May 22, 2013
In Williamson and Travis Counties, I see more Contracts for Deed and Seller Financing transactions than "lease-to-own." Although a Realtor can certainly help you locate something when you're ready to move forward, you should consider consulting with a real estate attorney first. You can typically figure out your best option within the first appointment, and he/she can explain the differences and pros/cons for each option so you know what to expect. This information will help TREMENDOUSLY when you contact a Realtor to locate sellers willing to sign off on these transactions. The down payment requirement will vary depending on the property and the seller, of course, so it's difficult to make a suggestion. The size of property you desire will be more limiting, simply due to the location, but Leander, Liberty Hill, parts of Round Rock, Cedar Park, & Georgetown offer acre+ lots. I used to work with a real estate attorney, and it's very common for these questions to arise. :) Remember, though, the interest rates will almost certainly be higher than "standard" mortgage rates. You have options, though, so rest easier. I would begin trying to save 3% down for whatever you've budgeted as a purchase price, and see a good real estate attorney soon, so you can begin saving for the right purchase/loan option for your circumstances.
0 votes
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