Adriana Camp…, Renter in Garden Grove, CA

is the rent to own option legit? I have been seeing homes listed under this option

Asked by Adriana Campos, Garden Grove, CA Sun Jun 3, 2012

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Robert Chome…, , San Diego, CA
Mon Jun 4, 2012
Find a good book on lease options and read it first. Google John T. Reed lease options or John Schuab, they both have good books on the subject.

1. Make sure you get a long lease
2. Make sure your record the option at the county recorders
3. Put as little down option deposit as you can

...and much more.
2 votes
Sheryl Arndt, Mortgage Broker Or Lender, Woodland Hills, CA
Fri Mar 27, 2015
Hello Adriana, rent to own usually want atleast 10% down and up as well as an additional 3% fee which is minimum 13% down not including closing costs. You may already qualify to buy to own instead of rent to own.

You may qualify to buy FHA with fico scores between 500-579 with 10% down or minimum 580 fico score may qualify FHA 3.5% down or as low as .5% half percent down payment program. You may consider 3% down conventional from a minimum 620 fico score. Your fico scores can be raised within 3-4 days in most cases to qualify for programs, rates and terms as necessary.

You will need to be pre-approved to be able to meet an agent to view and submit offers on any homes of your choice. Your qualifications will be determined by your credit profile, debt to income ratios, fico scores, home price, loan program and how much you want to invest into the down payment and closing costs.

If you figure out what cities/zip codes you are considering, minimum number of bedrooms and the maximum payment/price you are looking to achieve you can be emailed listings to fit your search criteria. Your email address is needed to set you up for the automatic daily updates.

The purchase in 92804 zip code of Anaheim start from 169k for 2bd 1.5ba condo, 259k for 3bd 2ba condo and the single family homes start from 315k for 3bd 2ba home which is as low as $1,575 down payment with a minimum 580 fico score @315k. If it is a REO foreclosed home that needs repairs you may choose the 203k purchase loan to renovate from a minimum 580 fico score.1ba

It only takes a few dozen questions to qualify, go over your options and email you listings to study and compare. Here are some links to study as well as web reference links to many loan program pages offered...

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0 votes
Cheryl Pelle…, Agent, Rancho Palos Verdes, CA
Sat Nov 15, 2014
Rent to own has its advantages and disadvantages. If you are someone who has credit problems, self-employed or you can't afford a substantial down payment rent to own could be a possibility for you plus you can move into the home as soon as you have paid your option fee and lease payment. It depends on your personal situation. The disadvantages are you don't receive tax deduction benefits, you may be paying a higher price, and you are responsible to do your research and verification on the property. Like Robert answered, get a good book on the subject or a lawyer help you understand the props and cons.
0 votes
Gary Dobbs, Agent, Yorba Linda, CA
Wed Oct 15, 2014
Yes the option to rent-to-own is legitimate. If you want to buy a home check all your resources to get pre-approved with a lender. I'd be happy to recommend some Lenders that will give you great prices and terms on a loan.

That can be a great option for you to get into owning your home, if you cannot qualify for traditional financing. There are other ways to finance purchasing real estate.

Call me and I will tell you what I know. 657.234.5777
0 votes
Jeri Anghel, Agent, Springfield, MO
Sun Jun 1, 2014
Be cautious there are many scams out there! Use a good Realtor to assist you. Jeri Anghel
0 votes
Joanne Kim, , Seal Beach, CA
Tue Jun 5, 2012
No. It is Short Sale.
as owner occupy FHA buyer shall have FHA203k with it other than that will NOT be qualify for the subject property.

If you looking for Lease Option to Purchase, I need to know what kind of Option Money we talking about and what area??

Joanna Kim@ 714-606-2889 Mobile
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0 votes
Birgit O'hea…, , Orange County, CA
Mon Jun 4, 2012
Hello Adriana,

The advice you have been given from all the Realtors who have responded to your question is excellent. Are you looking to buy or lease a property at this time? If you are interested in doing either, I would be happy to you.

With Warmest Regards,

Birgit O'Hearn
(949) 582-7955
Windermere Real Estate SoCal
DRE# 01886700
0 votes
Ron Thomas, Agent, Fresno, CA
Mon Jun 4, 2012
Is Lease/Option LEGIT? probably.
Is it a good idea? Seldom!

Here we go again with a gimmick to get people in a house that they cannot afford.
The Buyers are desperate, (or in love with being HOMEOWNERS) and the Sellers can take advantage of it:

The Seller can dictate the terms of rent and the Option, they can give them an Interest Rate of 7-8-9% and the Buyers don't realize what's happening: If they cannot fulfill the Option in 3-5 years, they stand to lose all the Escrow money and the house. If they do fulfill it, they could be stuck with a bad loan.
And who is protecting their interests?
0 votes
Emily Knell, Agent, Huntington Beach, CA
Mon Jun 4, 2012
Only in mid 2004 & no later than early 2006 was a lease option a good idea (this is my date range for the purpose of your question) Because in mid 2004 let's say you locked in a price with an owner for $300K should you have chosen to exercise your lease option & then by mid 2005 when you went to a purchase contract the place was now worth $400K, the owner would have HAD to sell it to you because you're exercising your option to buy at the previously approved price.

In a declining or steady pricing real estate market the lease option is Not such a good idea, especially since you'd be putting up Non-Refundable Option monies. In this type of market, get into a lease if you have to with just the clause of "First Right of Refusal", no option monies required, just 1st, last & security deposit or 1st & security deposit. If you REALLY want to buy it in a year, per the owner wishing to sell, you have 1st dibs!

If you are looking for a home in Garden Grove, I live nearby & could help you find a place.

If you are going to look for a rental, please read my 2 blog postings here on Trulia called "RED FLAGS - RENTAL SCAMS - PUBLIC BEWARE". This will aid you in your search & you'll be less likely to get scammed.

Shoot me an email directly if you'd like to talk to me some more. I don't look back on this same Trulia thread for answers posted after mine.
562-430-3053 c
Realtor Since 1996
Main Street Realtor
0 votes
Jim Simms, Mortgage Broker Or Lender, Louisville, KY
Mon Jun 4, 2012
They can be legit, but they rarely ever work out for the buyer. Rent to own is probably not what you expect. In this type of transaction the underlying assumption is the seller will be able to perform in addition to the tenant/buyer. Be careful putting up any large sum on a rent-to-own, most buyers and sellers are under the impression whatever deal they put together will be accepted by any lender when it comes time to actually purchase a home, NOT TRUE!!! The mortgage underwriting guidelines are very specific and an underwriter may not agree with the terms on your original lease option. You may think all or part of the rent paid goes to down payment, not necessarily how it works when it comes time to get a mortgage and close the deal. You may meet your obligations with the seller but the transaction may not qualify to meet the requirements for down payment, very, very tricky, be careful.

There is a lot of information on the link below. I hope my observations keep you away from harm, good luck.

Jim Simms
NMLS # 6395
Financing Kentucky One Home at a Time
0 votes
Thom Colby, Agent, Irvine, CA
Mon Jun 4, 2012
Adriana -

As Tina said, rent-to-own is an option that's available. Typically, there is a hefty upfront payment and the monthly rent would be higher than typical with some of it going towards the downpayment each month. You said "I have been seeing homes listed under this option". Where are you seeing these listed? BEWARE if you're seeing these on Craigslist - there are many scams listed there. Also beware if you're seeing "Bandit Signs" - those are the yellow or white signs near freeway entrances and exits. Someone advertises what seems to be an awesome deal, the "rent" seems reasonable or even below market, and it's really easy.... They take your upfront cost and hand you keys. THEN you discover the keys are useless becasue the person who rented you that house is really not the owner - they do not even know the owner! They just took your money and now you have no where to live.

There are not very many true Rent-to-Own properties around. It would typically have to be a home that is owned free and clear / without a mortgage. If there is a mortgage on the property, there would likely be a "Due on Sale" clause in that current mortgage. That means, as soon as the "seller" signs that "Contract for Deed" over to you, their mortgage becomes due-in-full to their mortgage holder and unless they can pay it off in full, they will be in default and could be foreclosed upon.

Also, beware of sellers who are in foreclosure. They are trying to find a way to hold off a foreclosure and your upfront money is going towards their past due payments. (Desperate people do desperate things)

Whatever you do, either use a Realtor or an attorney to make sure you are not "taken".

Best of luck !
0 votes
Tina Lam, Agent, San Jose, CA
Mon Jun 4, 2012
It's a legit real estate arrangement. The key is to have the right terms to protect yourself. Have a local agent help you review the deals available so you don't get caught in one-sided deals, which can happen even in legit offers.
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