is rent to own a good idea to do for people with bad credit?

Asked by jlynnacevedo, Walpole, MA Sun Jan 6, 2013

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16
Debra (Debbi…, Agent, Livingston, NJ
Sun Jan 6, 2013
I will be short, sweet and to the point - NO - "rent to own" is not a good idea for people with bad credit....there are numeorus pitfalls.... and you could stand to lose money.

Clean up your credit, save up your money.........then buy a home when you can, and will, be approved for the loan.

Best wishes.....
2 votes
Ron Thomas, Agent, Fresno, CA
Sun Jan 6, 2013
Lease/Option
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.

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!

An additional thought: Lease/Option does nothing for your Credit Score.
2 votes
I was burned on rent to own by a trusted friend. 10,000.00 and a year later, she wants her house back.
Flag Wed Jun 4, 2014
Christopher…, Agent, Tarrytown, NY
Mon Jan 7, 2013
Hi, rent to own deals always favor the seller and aren't a great idea. You will be better off fixing your credit and in time entering into a comfortable transaction.

Chris
1 vote
Steve Casey, Agent, Walpole, MA
Sun Jan 6, 2013
There aren't a lot of opportunities for rent to own. It's usually a desperate effort to move on when the market doesn't work for selling.

On the other hand, credit still counts. An owner would have to have faith that you would pay your rent as well as improve your credit in Oder to eventually perform.
1 vote
Divapupsect, Home Buyer, New York, NY
Wed Oct 12, 2016
how do I get started I am looking to rent to buy a home and I have very good credit and I'm first time home buyer
0 votes
Divapupsect, Home Buyer, New York, NY
Wed Oct 12, 2016
how do I get started if I'm a first-time home buyer I'm looking for a mobile home
0 votes
Jean Curley, Agent, Franklin, MA
Tue Oct 1, 2013
Jlynnacevedo - Honestly, it would be very difficult for you to find a rental opportunity with the possibility of purchasing at this time. When the market took a downturn, it was flooded with foreclosed sellers looking to rent a home. That situation alone, without the intent to purchase created concerns and issues for seller/landlords. If you found a potential seller that would entertain this prospect you would need to hire an attorney and negotiate the contract to protect your interests. One issue you would have to deal with is the value of the property when you take ownership but I would assume the seller would pad the contract to protect them and this could harm you in the long run. The best advice would be to build to watch your spending, build your credit and within 6 months to a year get another preapproval and see where you stand.

If you need a responsible and trustworthy mortgage lender to work with, let me know and I can guide you in that direction. Good luck and call me if you have any questions.

All the best,

Jean Curley
Realtor & Advisor
Coldwell Banker Residential Brokerage
508-479-2106
jeancurleyrealtor.com
jean.curley@nemoves.com
0 votes
Annette Law…, Agent, Palm Harbor, FL
Tue Oct 1, 2013
This question was posted Jan 6, 2013
Rent to own is ALWAYS a bad choice for those with bad credit.
Rent to own, can possibly be a solution for those who have been denied credit (non-w-2 income)
-
The situations where this is proven to be benefical to all are extremely rare and carefully created.
-
0 votes
Kawain Payne, Agent, Seal Beach, CA
Tue Oct 1, 2013
In my opinion rent to own is not a good idea no matter what kind of credit one has.

Think of renting as renting and buying as buying. I would advice you to work on improving your credit scores, so that you may get in a position to buy in the near future.

Best of luck to you!

Kawain Payne, Realtor
0 votes
Trevor Curran, Mortgage Broker Or Lender, Great Neck, NY
Mon Jan 7, 2013
Good morning Jlynnacevedo,

Rent to own is a better deal for a home SELLER than it would ever be for you as a HomeBuyer. Often consumers believe that rent to own is a viable opportunity to become a homeowner if there are credit issues affecting the ability to qualify for a mortgage loan today. I prefer and advise you to take a more careful and considered approach. Work on your credit issues first. Put your financial house in order, as it were, before you take on the responsibility of owning a home. You'll feel better about your financial status as a result. You also won't be a target for financial predators due to a weak credit/financial profile.

First, settle any outstanding debt. If you owe money on collection accounts, charge-offs and/or judgments, make payment arrangements and get these accounts paid promptly.

Next, begin rebuilding your credit. If you have current accounts with good payment histories, or even some previous late-payment-blemishes, make sure you continue to pay those accounts on time. If you do not have any existing credit accounts then you'll need to establish several in order to create a viable credit history.

I have found that CONSUMER ACTION is an excellent resource for objective advice on all things credit related. You'll find free and sincere advice on everything from settling collection accounts to rebuilding credit to building credit from scratch on their website. http://www.consumer-action.org/

Beware of anyone offering to "repair" your credit! The Federal Trade Commission issued a stern warning last year that such offers are scams. Find more from the FTC HERE. http://www.consumer.ftc.gov/articles/0058-credit-repair-how-…


The best way to buy a home is to have a decent credit history combined with sufficient Income and Assets for a home purchase.

The best way to have a decent credit history is to settle negative outstanding obligations and pay all your bills on time for at least two years.

Trevor Curran
NMLS #40140
Mobile: 516-582-9181
Office: 516-829-2900
Fax: 516-829-2944
PowerHouse Solutions, Inc.
185 Great Neck Rd, Suite 240
Great Neck NY 11021
Licensed Mortgage Banker – NYS Dept. of Financial Services
NMLS#3528
0 votes
Territory.c…, Agent, MA,
Mon Jan 7, 2013
Sure, if the owner would be interested in this type of transaction. I would say the only big downside to this type of deal is that you lock yourself into a sale price way in advance so if the market happens to tank you would be paying an over market price.

Good luck!

Territory.com
Massachusetts Premier Buyer Brokerage
617 848 5407 x701
Web Reference:  http://territory.com/
0 votes
Kathy Schell…, Agent, Plymouth, MA
Mon Jan 7, 2013
This scenario is extremely complicated with potential problems for each side should the situation not work out in the long run. It is important to consult an attorney and if you are working on improving your credit score with the intent of purchasing in the future, you should consult with a lender prior to entering such an agreement. Will the landlord/seller be holding money in escrow toward your deposit? How will this be recognized in your purchase? Should you not purchase the home will some of the money be returned? There are many variables in this type of situation and you should plan process through to the end before you begin.
0 votes
Henry Mcnealy, Agent, MEDFIELD, MA
Sun Jan 6, 2013
Hello jlynnacevedo
It is a very good idea to try to improve your credit,but it is very hard to find a seller that would rent to own to someone with bad credit . H & R Block has a new program that may help build your credit back up . Stop by the Dedham Office to ask about it.I also think you should talk to a mortgage company or financial advisor. Build your credit than think about buying a house or condo. Good luck Call or e-mail me if you need a mortgage co or Financial Advisor to talk to.
0 votes
I agree about speaking to a mortgage company or financial advisor which was my personal aim at one point. Unfortunately with my experience, they only want to speak with you IF you've already submitted an application for a loan in the present NOT if you are planning and trying to get insight on how to improve credit for future intentions.
Flag Sun Dec 29, 2013
Jean Curley, Agent, Franklin, MA
Sun Jan 6, 2013
jlynnacevedo - If you can find a seller that will allow this scenario. The market has experienced many people who were caught in the mortgage meltdown, people who were foreclosed on, and found themselves without a home. These people would try to find a rental and that alone was a problem since their credit was damaged from the foreclosure process. A landlord would run a credit check to determine the risk of the potential tenant and if financials are an issue they have reason to not want to rent to that particular applicant. If you are fortunate and find a home that a seller would negotiate this particular deal you would need to establish value of the home before contract. This can cause a problem down the road when you intend to fulfill your obligation as a buyer. What is the value of the home, will it appraise, etc. Can be a complicated situation that I would never advise a seller to get involved in, as a sellers representative. There is no need unless the property has some kind of functional obsolescence, meaning defect that affects value. Good luck and contact me if I can personally answer any additional questions you might have.
0 votes
Sarah Goulart…, Agent, Plymouth, MA
Sun Jan 6, 2013
Rent to own properties are extremely hard to find in the marketplace. In my opinion, limiting yourself to only those properties isn't the best move and I would rather see buyers work on their credit and qualify for financing so they can shop and pick the property that works best for their needs.
0 votes
Joyce Lin, Agent, Leominster, MA
Sun Jan 6, 2013
That really depends on a number of factors.

Working to improve your credit is always in your best interest.

Let me know if you want the name of a Loan Officer that can advise you on that.

j
0 votes
I'm working with freedom rent to own also known as veracity.com they help with rent to own and people with bad credit
Flag Thu Sep 24, 2015
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