What is RENT TO OWN HOMES? How does it work? What are the requirements to buy a new home. First time buyer w/bad credit....

Asked by Laura Mejia, Petaluma, CA Mon Jun 17, 2013

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Ron Thomas, Agent, Fresno, CA
Mon Jun 17, 2013
You are desperate!
Your Credit or Finances, or both, will not allow you to go the conventional route:
You need the Seller to help you out!

The Seller will know it, and you are going to pay dearly for this service:
There aren't too many altruistic Sellers out there.

There is no FORM printed by anyone; there are just too many variables.
The terms that can be written into a Lease/Option can be dangerous to you:
How long is the Option period?
How much money are you putting in to the Option?
What happens if you are not able to execute the Option?
How do you know what your financial situation will be 2-5 years from now?
How much is the rent in the meantime?
Who will be responsible for maintenance and repair in the meantime?
What will be the Market Value of the home in 2-5 years?
What will be the Selling price 2-5 years from now?

This is the Ultimate Caveat Emptor!

Good luck and May God bless
1 vote
Bill Sockolov, , Marin County, CA
Tue Jun 18, 2013
Hi Laura,

Being on the loan side of the real estate business, I'd like to address your question regarding the requirements to buy a new home...and "bad credit." Not knowing what your credit issues are...there may be ways to improve your scores to help you qualilfy for a loan. Not only are there many credit repair tactics, but there are several loan programs that allow for lower credit scores.

I suggest speaking with an informed Loan Consultant to discuss your issues.

Please feel free to contact me with questions. I am local.

Take care,
0 votes
John Souerbry, Agent, Fairfield, CA
Mon Jun 17, 2013
Ron brings up a lot of good points. A Rent To Own (RTO) is simply a home that the owner will give you an option to buy while you rent it, usually by paying a little extra each month in what can be either a purchase deposit, option fee, or both. A specific option expiration date is usually identified. If you don't exercise (buy) the home by that date, you lose the option and any fees or deposits that you have made. That said, the actual terms on any RTO are not pre-defined they can be whatever you and the seller agree on.
In the RTO sales that I've brokered, the seller ALWAYS required that the renter/buyer have good credit from the very beginning. Whether the seller would give you the loan to buy his house or you have to go to a regular lender for a mortgage, good credit is always required.
That said, there are some RTO sellers will allow a renter/buyer to start the process because they know this fact: Very few RTO sales that start ever actually end in a sale. Either the buyer decides they don't want the house, the buyer decides they can't afford the house, or the buyer can't get financing before the option expires. Some sellers will accept the RTO buyer as a renter and take their rent, option fee and deposit knowing that it's all profit for them - until the deal falls apart. You don't want to work with that type of seller.
Best of luck.
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