1. You'll still have to come up with a lump sum (essentially a down payment) or "option" to enter into the agreement. This is due upfront and is usually a percentage of the purchase price. Plan on $3000-5000.
2. You'll agree on a date when you'll have to exercise the option to buy. Let's say 2 years from now. At that time, you'll still have to qualify for a loan, and have sufficient down payment.
3. If you pay the rent late even once, the seller typically reserves the right to keep everything and void the deal.
4. How do you know the price you negotiate down the road will still be a good deal when it comes time to actually purchase the property? Will you qualify for the financing then? Will it appraise out?
5. You'll be responsible for the upkeep of the property throughout the life of the lease. If the furnace goes out, you'll have to fix it. Same for the roof, plumbing, and everything else. Remember, this is for all intents and purposes now "your" house.
Violate any of the above terms and the seller keeps everything you gave them upfront, and also all of the money credited towards your down payment from each month.
Too much risk, too much money, and too much uncertainty about what your situation or finances will be too far down the road in the future.
Hope this helps!
Also, I'd definitely recommend speaking with a competent agent and maybe an attorney prior to signing any agreement and reading up on some possible pros or cons on a rent to own deal. There's some good resources online that can help you understand some of the key points for a good rent to own deal and also some of the pitfalls. Here's a few examples:
Just make sure you know what you're doing and don't take a seller's word for it if you aren't sure about a deal. This market where many cities have rising home prices would be a time you'd want to set the sale price NOW and not in the future. The opposite is true in a downward trending market. Keep that in mind also.
Honestly, I think it would be more fruitful to follow some of the other advice here, such as looking for a 3 1/2% loan, or a 0% down USDA loan. The latter only apply in "rural" communities, but there are parts of Maricopa county where you can get a new house with a USDA loan. Work on saving as much as you can at the same time.
Best of luck,
Ann Griffin, Realtor
Coldwell Banker Trails and Paths
2913 N. Power Rd., Suite 101
Mesa, AZ 85215
The KUHL Team
Buy and Sell Smart Realty
There has been some good advice given. I would agree, work with an agent with experience in this area. A "Lease Option" can require you to commit to an agreed upon price at time of the lease. But keep in mind market conditions may change by the end of your lease period and that price may or may not look so attractive.
There is a lending program that requies only 1% down. I can put you in contact with the lender if you would like more information on this program. With an FHA loan your down payment can come in the form of a "gift" from a relative. Also, I have information on an additional home buyer's program which provides upto $15,000 towards your down payment.
There are many options available to assist you when buying a home. Contact me with you would like.
Any realtor who is a member of the MLS can provide the information. While there may not big a large supply of these type of homes - they are available.
I noticed you mentioned saving for the 20% down payment. Are you aware you can purchase a home (not lease option) with as little as 3.5% of the purchase price and have the seller contribute up to 3% of the closing costs? With interest as low as they are today, you should consider looking at purchasing home.
I work the North Valley and noticed Deer Valley is the area mentioned. I will be happy to help you find a well-priced property where you can own and derive the benefits of home ownership. I have provided my contact information and look forward to the opportunity to be of service.
Milly Sells AZ
Any Realtor can send you a search of lease purchase or lease option homes. But there are programs such as the USDA rural financing that is zero down. Please feel free to contact us for assistance. It is a great time to buy and you do have options. You can also use this link to search our MLS system for homes: http://link.flexmls.com/ua70wacvime,12
Ron & Brenda Cunningham
West USA Realty
***** Recognized in the Phoenix Business Journal as "One of the Top 50 Agents in the Valley" *****