renting with option to buy, good thing?

Asked by Gabbie, Birch Tree, MO Wed Feb 23, 2011

IF YOU CANNOT AFFORD A DOWN PAYMENT AND ALSO HAVE LOW CREDIT SCORE CAN A PERSON LOOK INTO RENTING WITH OPTIO TO BUY? THAT WOULD BE THE ANSWER FOR A LOT OF PEOPLE .

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4
Cole Haynes, Other Pro, Tampa, FL
Mon Feb 28, 2011
Gabbie,

Like the previous responses before mine point out, TONS of people get ripped off and lose money using a rent to own. I would like to point something out though, to you and any one else who might stumble across your questions.

Families lose money with rent to own homes because they do not have the proper understanding of how a rent to own works.

A typical lease agreement is a well known legal instrument and it's pretty straight forward. A rent to own adds an "option agreement" to the mix. This is only one additional aspect to a rental home, but there are very specific terms you must agree to when using a rent to own and signing an "option agreement."

The most important thing to take away is this, getting into a rent to own house because you weren't able to buy a house due to bad credit is not a solution. You still have to be able to qualify for a mortgage down the road BEFORE your option period expires. Not knowing this fact is like burning a few thousand dollars.

Do a search on "how does rent to own work" or check out our site below for free tips on how to successfully use a rent to own to buy a house.

Good luck!
0 votes
Anna M Brocco, Agent, Williston Park, NY
Wed Feb 23, 2011
There could be many pitfalls in a rent to own situation, and one could stand to lose a bit of money--therefore inform yourself well beforehand--consider consulting with an attorney who specializes in real estate, research such a scenario online as well, etc., so that an informed decision can be made--
0 votes
Steven Eddin…, Agent, Claremore, OK
Wed Feb 23, 2011
As a CENTURY 21 Realtor, I visit with families every week who have been burned by renting with an option-to-buy. While they sound like a solution to many people wanting to get out of the rent trap, these types of contracts tend to be predatory in the industry. These contracts have a major flaw that hurts the renter/buyer.

Generally, the renter/buyer enters into these contracts because they have some credit issues. The option-to-buy contract charges a premium for rent. Only a small portion of the rent will be applied towards the down payment. Since they are paying a premium for rent, the renter rarely fixes their credit issues before the due date in the contract.

When the due date arrives, the renter/buyer must come up with the entire down payment AND have their credit issues fixed. When this doesn't happen, the renter ends up losing everything.

The smart renter/ buyer rents a modest home and saves the difference for their down payment and for fixing any credit issues. Before entering into any rent-to-own contract, ALWAYS consult a professional for advice.
Web Reference:  http://TheRingingRealtor.com
0 votes
Aaron Crossl…, , Kirkland, WA
Wed Feb 23, 2011
This always sounds great, but there's something to keep in mind. When you try to finance the purchase, the bank will not give you credit for your rent payments as a down payment. Many people have come to me with a rent to own situation and they think their $1,500/mo for the past 12 months will be considered a down payment. Unfortunately, here's how it actually works. If fair market rent is $1,500 and you pay $2,000/mo, then the $500 extra every month would be consider to go towards the down payment. Please keep this in mind so you don't have a big surprise in 12 months!
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