How does rent to own work? My issue is not qualifying for a mortgage, I did that. But, I don't have the funds for a down payment! HELP!!

Asked by Nicole White, Brooklyn, NY Sun Mar 23, 2014

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Kathryn Lilly, Agent, New York, NY
Mon Mar 24, 2014
Rent to own does not even exist in markets like this when sellers do not know what price something will be a year from now.
It is sometimes used as marketing gimmick when all the markets are slow (not now!) You pay more rent for an apartment than it is worth, assuming that you will buy at the end of the lease, some of the rent will go towards the purchase price. The landlord/seller will not be subsidizing your rent or purchase price. If you do not buy, you loose all that additional rent!

Kathryn Lilly, Broker
Realty on the Greene, LLC
718-858-7600
KLilly@RealtyontheGreene.com
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Javier Menes…, Mortgage Broker Or Lender, Melville, NY
Sun Mar 23, 2014
Rent to own is pretty much an agreement between the tenant and landlord were a portion of your monthly rent is applied towards the purchase of the property. The agreement can vary in many different ways, but that's the general idea. I've never really seen many rent to own transactions, I'm sure there might be some out there, but wouldn't be surprised if you didn't find any at all. Realtors would be a great starting point. Good luck! IF MY RESPONSE WAS HELPFUL, CONSIDER CLICKING BEST ANSWER! • Javier Meneses Senior • Loan Officer • NMLS #23130 • STERLING NATIONAL BANK • 290 Broad Hollow Road, Suite 402E • Melville, NY 11747 • jmeneses@snb.com • (516) 606-9648 Cell • (631) 659-2011 Office • (516) 918-5383 Fax
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Dan Tabit, Agent, Issaquah, WA
Sun Mar 23, 2014
Nicole,
Rent to own works great for the landlord/Seller but is a terrible idea for the renter/buyer. Until you qualify you are a tenant. You have no more rights, but the seller may try to avoid some of theirs and imply you have further obligations, but you don't. In most cases, you pay a fee to purchase the right to buy at a later date and that fee is to be applied to your down payment. You would then pay over market rent, with a portion being applied to the down payment. The problem is, if you find someone willing to do this at all (there are very few in most markets) they want an over market price for the house and will keep all of your additional money if you don't qualify for the purchase within the time frames.
You have a better option. Find the cheapest rental you can stand to live in. SAVE YOUR MONEY. Get on a strict budget and put every nickel you can into savings. Avoid indulgences and brew your own coffee, do your own nails and stay out of bars and restaurants unless someone else is buying. Some people will even get a second job and put that money into savings too. If you did this for a year, it would be a pain at times, but you would be far better off, have way more saved for a down payment and if you still didn't buy yet, you'd still have all the money.
The year will go by quicker than you think and you'll have put yourself into a much better financial position and will have many more homes to choose from when you are ready to buy.
Best of luck.
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