Mortgage Loans

[ji9]

I've noticed a few different listings in the past couple days on our local MLS that says something a "new rent to own program".  Does anyone on here know anything about that?  I've tried to look online but found nothing.  It's more than one listing and more than one realtor with this mentioned.  Thanks! 

[cdtotten]

Rent to own programs are not a "new program", it usually is offered on homes that sellers can't move, so they offer to rent you the home and give you a partial credit of each month's rent towards the purchase price of the home.

Example - seller will rent you the home for $1,000 a month, and $150 of each month's payment can be used towards a down-payment on the home at the 1 year mark. So at year 1, you would have the option to buy the home for the negotiated price (with $1,800 being used as a down payment from your rent).

Notes on these:

- Usually the rent is artifically high to give you partial credit towards a down payment. If you don't intend to buy the home, don't do it.

- If you decide not to buy the home, your extra payment is lost forever.

These are almost always a bad idea btw.

[FrugalRican]

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cdtotten wrote:

These are almost always a bad idea btw.

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I've very rarely seen success with these.

More often than not, I've seen better results with people who just rent a much cheaper place, put the extra money towards the down payment in a bank account and eventually go into buying another house. Like cdtotten said, the rent tends to be artificially high and should be a full on committment by the buyer to eventually purchase the house.

[UpmyscoreinFL]

If I cannot qualify for a mortgage by July when I have to move I am hoping to look at houses that have been on the market for a while, see if the owners are willing to just rent it to me for a year, and then I can buy. Mostly to avoid moving twice.

[bigman023]

IMo, rent to own scenarios are what you make of them. Read everything. If it sounds like something you like, go for it.  I just got out of a rent to own.  The house was a model home in a new subdivision, located in the most desirable town in our area.  We started renting in 2009. We were looking to purchase in 2011.  The house was very nice with many upgrandes.

 What changed our mind was the fact that , in 2010 the county decided that a new county jail would be built directy behind the subdivision.  Also, when we moved in, the subdivision was about 10% full.  All of the original builders either went out of business or just stopped building. Our builder's primary business was remodeling. He stopped building as well. One new builder took over and he started building crap homes.  Our home and many of the original homes were 1900 -  2200 sq ft, and this new builder started building 1500 - 1700 sq ft homes. 

Our lease/purchase price was $185k.  This new builder was starting at $135K.  They mainly sold a package for $150k.  There was a HUGE difference in the inside of these homes compared to ours and the other originals. The new builder used popcorn ceilings, no crown molding, very basic master baths, etc...

Fast forward to 2011, and the subdivision was now 75% full, made up mostly of the new cheaper homes. Construction on the jail had began.  The landlord made it clear that he couldnt go lower than $175K.   I sent hime a letter about all the new circumatances (new builder, jail, etc..) and I made him a final offer of 165K if he built a privacy fence and made a few other upgrades.  The landlord didnt respond to my offer I sent to him, until the day after we put a contract on another home.  He countered with 165K no fence or any other upgrades, so it would not have mattered anyway.

Rent to own worked in our favor in a few ways, even in this scenario, although we didn't purchase the home.  I would recommend rent to own.  But beware, things can go wrong if you have a flakey landlord.  My landlord was great, he just made a decision based on his financial requirements, fine.  But our agreement was fair and he was prepared to sell the house at some what of discount.  Unfortunately the housing market changed things to where it was more beneficial for him to find another renter than to sell the house at the price I was willing to pay, and it was more beneficial for me to purchase a new home in an even better subdivision as the lower interest rates made it so we could afford more house.  Being the big fish in small pond is not what I want to be when it comes to where I own real estate..

Rent to own does let you take the home and neighborhhod a test drive before you purchase.  But again, do what you can to make certain you are dealing with a good and decent seller/landlord.  

Good Luck! 

[boomhower]

In a lot of the deals I have seen the sell price is inflated as well.  I would pass and rent something cheaper until you are ready for a regualr mortgage.

[marty56]

I would also wonder about the owner's credit history.  You don't want t rent from anyone who's home could possibly be forclosed on.  Rent to own or not.

[aussiesareforever]

I agree that it seems better to rent somewhere cheaper and save the downpayment in a different account (with interest). I wouldn't be very happy if I paid all that money only to decide I didn't want the house a few years down the road.

[JusdoNit]

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bigman023 wrote:

Being the big fish in small pond is not what I want to be when it comes to where I own real estate..

Rent to own does let you take the home and neighborhhod a test drive before you purchase.  But again, do what you can to make certain you are dealing with a good and decent seller/landlord.  

Good Luck! 

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+1000

[Annaliese]

Bigman:

I have a friend who is trying to get out of the lease to purchase contract.  My main question is.. how did yo get out of the contract? Was the contract that you signed was for a year, 2 or 5 years? According to their lease to purchase agreement, they have until 2015 to purchase the house. They gave the owner like a downpayment and a portion of their monthly payment is applied towards the 'down payment' in the future.  Things were doing wonderful until Spring last year, the basement was flooded and they tried everything to fix the issues but the house is falling apart. Electricity isn't up to code and the last straw was the mold in their basement.  They want to get out of health reasons since she is now having a bad reactions to molds.  But she was concern that if they get out before 2015, they will have to pay the 'rent' until then.  So I was just curious about your situation.