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Rentals in Greater Heights : Real Estate Advice

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Sun Apr 14, 2013
Al Geffon answered:
First and foremost, Texas Realtors are not permitted to participate in rent-to-own transactions. You'd need an attorney to draw up two separate contracts ... one for the lease, the other for the sale.

These are outstanding opportunities ... for the property owner! All the risk is on the tenant/buyer, and the landlord/seller still retains the house in the event of a default, in addition to keeping all the money. In this market, there are few if any such homes available. With properties selling almost as fast as they're listed, why would an owner enter into such an agreement, when he/she can cash out and be done with the place in a matter of weeks? If by chance you ever come across one offered as rent-to-own, it would likely be in a less-than-desirable location, have serious issues, or both. Contrary to common belief, little or none of the rent would be credited toward the down payment, the interest on the sale portion would be at least twice the going bank rate, and you'd still have to qualify for a mortgage in a few years to pay off the owner (it's referred to as the "balloon").

I assume that you're considering this transaction because you do not have a sufficient down payment at this time. The last thing you want to do is to purchase a home on a shoestring, irrespective of the type of financing used. I always recommend that potential buyers figure their current monthly expenses to the dollar, then add 15%. If the number is comfortable, it's reasonably safe to proceed. Of course, the down payment would need to be in liquid cash ... I always advise my buyers to have 6% to 8% of the sales price at hand for an FHA-insured loan, to cover all upfront costs including the down payment. Using $150,000 as a base, you'd have to show $9000 to $12,000.

My advice is the same as the others' ... continue leasing until you've accumulated sufficient cash to proceed with a purchase. Keep your FICO score at least in the mid-600's (of course, the higher the better) and focus on the objective. You'll be there before you know it. I wish you well.

Regards ...

Al Geffon
(713) 213-6350
al@geffon.net
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