topic Re: Rent to own programs in General Credit Topics

Rent to own programs

Anonymous — Tue, 27 Apr 2010 20:37:05 GMT

Does anyone have any knowledge or experience with Rent-to-own home buying or seller financing for people who need to work on their credit? I checked online for a few rent to own programs and from what i could tell the interest was very high (like between 7-10%) with down payments ranging from 2k-10k. From what i understand your downpayment goes toward the purchase of the home when you are ready to buy. I am just wondering if anyone thinks this would be worth it, or if i should just wait until i can increase my credit and qualify for a traditional home loan.

Re: Rent to own programs

RobertEG — Wed, 28 Apr 2010 04:46:36 GMT

I would never consider such an option without advise of competent legal counsel.

I am not saying it is good or bad.

But it is a mix of real property law, rental property law. contract law, and investment law.

Hire an attorney.

Re: Rent to own programs

Jazzzy — Wed, 28 Apr 2010 12:47:17 GMT

There is no generalized "rent to own" housing program, so what you find will depend upon the individual seller. This is also true for seller financing.

I am closing on a property this Saturday that is seller financed...plus the seller is giving us $8k for repairs. She will carry that amount plus the selling price of the home at 6 1/2% interest. She will hold a first mortgage on the property. This is a seller who does this with properties she used to hold as rentals. This will be a rental property for us as well. She does it for the security of the interest income. If you can find someone to do this, be certain that there is no prepayment penalty. In our case, for example, we will refinance the property once we get it cleaned up and rented.

I give the above as an example, but I would advise most people not to do this. We have a lot of experience in real estate, plus we know the seller. We're in a small community. It is a process that is full of pit holes for both buyer and seller.

I would recommend that you work on rebuilding your credit and have the downpayment money to buy your own home outright. Even with the rent to own process, there are always repairs to be made. The roof leaks or the furnace breaks down. You may find yourself with all the liabilities of home ownership without all the perks. Anyone considering buying a home has to know that they can either pay cash for or get the financing for a furnace or roof, for example. That takes a deep pocket or very good credit. Rebuild your credit and save your money...then buy with confidence at a decent interest rate.

Re: Rent to own programs

Anonymous — Wed, 28 Apr 2010 13:07:51 GMT

@Anonymous wrote:
Does anyone have any knowledge or experience with Rent-to-own home buying or seller financing for people who need to work on their credit? I checked online for a few rent to own programs and from what i could tell the interest was very high (like between 7-10%) with down payments ranging from 2k-10k. From what i understand your downpayment goes toward the purchase of the home when you are ready to buy. I am just wondering if anyone thinks this would be worth it, or if i should just wait until i can increase my credit and qualify for a traditional home loan.

Out here, they're classified informally as scams. Too many complaints.

Here's an article from MSN

http://realestate.msn.com/article.aspx?cp-documentid=17761848

""It's very risky for the occupant to go into rent-to-own," said Donald Haurin, an economics professor at Ohio State University in Columbus. "All you have to do is violate some part of the contract — a late payment or some kind of maintenance obligation — and the owner can say the contract is violated. If there's some money that's been set aside for future equity, that can be lost.""

Robert is right about seeking real counsel before delving into this; Lynnette is also right about being able to buy outright, though I don't know many people who have hundreds of thousands of dollars laying around. That's illegals pooling together resources money. We don't know how much of a down payment you're comfortable with, or even how much the home you're looking at is on the market for and you're willing to pay for.

Good luck in your house hunt. There is a great house waiting for you. Don't jump on rent to own without a lot of forethought and study.

Re: Rent to own programs

Jazzzy — Wed, 28 Apr 2010 13:14:28 GMT

Nonaii wrote:

Robert is right about seeking real counsel before delving into this; Lynnette is also right about being able to buy outright, though I don't know many people who have hundreds of thousands of dollars laying around. That's illegals pooling together resources money. We don't know how much of a down payment you're comfortable with, or even how much the home you're looking at is on the market for and you're willing to pay for.

Good luck in your house hunt. There is a great house waiting for you. Don't jump on rent to own without a lot of forethought and study.

Oops! I didn't realize how that sounded! I didn't mean outright as in pay cash. I meant with your own mortgage.

I don't even own my house "outright." Maybe someday....however, if my son has his way, I never will. He thinks there are better uses for money than a paid off house, but that's a discussion for a different thread.

Sorry about the confusion.

Re: Rent to own programs

Anonymous — Wed, 28 Apr 2010 18:02:28 GMT

There is no generalized "rent to own" housing program, so what you find will depend upon the individual seller. This is also true for seller financing

45 out of 50 states have some type of legislature on rent to own programs. Some of them include housing.

I would check the laws in your state for rent to own laws.

Re: Rent to own programs

Jazzzy — Wed, 28 Apr 2010 18:41:00 GMT

@Anonymous wrote:
There is no generalized "rent to own" housing program, so what you find will depend upon the individual seller. This is also true for seller financing
45 out of 50 states have some type of legislature on rent to own programs. Some of them include housing.
I would check the laws in your state for rent to own laws.

Exactly. Each property will be different, and each seller will be different. And each state will be different.

It is so fragmented that it is almost impossible to give generalities...except be careful. Very careful. I've seen both buyers and sellers get hurt.

Re: Rent to own programs

Anonymous — Wed, 28 Apr 2010 19:36:43 GMT

@LynetteM wrote:
@Anonymous wrote:
There is no generalized "rent to own" housing program, so what you find will depend upon the individual seller. This is also true for seller financing
45 out of 50 states have some type of legislature on rent to own programs. Some of them include housing.
I would check the laws in your state for rent to own laws.
Exactly. Each property will be different, and each seller will be different. And each state will be different.

It is so fragmented that it is almost impossible to give generalities...except be careful. Very careful. I've seen both buyers and sellers get hurt.

The laws are pretty straigt forward with what the seller can and cannot do when it comes to housing. Yes, those laws may vary by state as do many laws. But, if the individual knows what the laws for their state are before getting involved, then they can make an informed decision based on those laws.

And as with everything else, get everything in writing.

I choose not to do a rent to own only because the monthly rent is usually way to expensive.

Re: Rent to own programs

Anonymous — Thu, 29 Apr 2010 09:28:18 GMT

My recommendation is for you to invest in and protect your interests first and foremost. By that I mean to consult an experienced residential real estate attorney. Local real estate brokers should be able to refer you to experienced and trusted professionals. It is equally important to have the property inspected by a certified home inspector. I would recommend that you steer away from properties with critical structural deficiencies. Infrastructure, utility issues, electrical, plumbing and HVAC matters should carry particular consideration in your decision.

My sister is a paralegal with real estate experience. I could tell you a litany of disheartening stories she has shared with me over the years where honest, hard working folks with the best of intentions have been grossly taken advantage of and seen their dreams of owning a home circle the drain. In too many instances, a single default early on in rent-to-own contracts can come back to haunt you later down the road, most notably if the seller decides to suddenly be a horse's butt. That single default from a while back is usually grounds for the property owner to void the contract, and you may quickly find yourself looking for a new place to live.

If the time comes where you want to proceed with rent-to-own, be wise and fair to yourself by making sure you've thoroughly considered a multitude of potential circumstances that could happen if the contract is signed.

Here's an alternative that may be worthy of your consideration. Contact the housing authority at the state level. Many times there are state and or federally funded programs that assist low income and financially distressed persons with home ownership. You may be pleasantly surprised by some of the benefits in these programs. Where I live, the state offers very low rate financing with very little or nothing down for persons interested in homes that need modest/reasonable amounts of rehab.

Best wishes.

Re: Rent to own programs

Anonymous — Sat, 01 May 2010 12:48:04 GMT

thanks to everyone who has replied thus far. My problem is not my income or my ability to make a down payment. My problem is simply my credit score. I have baddies that wont fall off for years and I have done everything i can (taking the advice from this board) to get them removed. I have been unsucessful and have come to the realiztion that i just have to wait, and wait, and wait.

I am tired of living in apartments and want to feel like the money i am spending every month is acutally going toward something. My husband and I were considering expanding our family, but can't do it without more space. I don't want to keep moving my family from place to place. I would like us to be able to be settled in a new home. I only considered rent-to-own or seller financiing for these reasons. I live in tennessee, and here they have some rent to own properties that are new construction. I just didn't want to make a down payment and end up losing it over some stupid glitch in contract. It sounds like the majority of you don't think its a very good idea, so i guess I will just have to wait and see if I'll ever be able to fullfill my dream of owning a home. Its very frustrating because I have the money and the income for it. I litterally have no debt either. My past credit issues (3 year old bankruptcy and multiple paid medical collections---yes i tried the Hipaa process and it didn't work) are still haunting me.

Re: Rent to own programs

Jazzzy — Sat, 01 May 2010 13:03:19 GMT

@Anonymous wrote:
thanks to everyone who has replied thus far. My problem is not my income or my ability to make a down payment. My problem is simply my credit score. I have baddies that wont fall off for years and I have done everything i can (taking the advice from this board) to get them removed. I have been unsucessful and have come to the realiztion that i just have to wait, and wait, and wait.

I am tired of living in apartments and want to feel like the money i am spending every month is acutally going toward something. My husband and I were considering expanding our family, but can't do it without more space. I don't want to keep moving my family from place to place. I would like us to be able to be settled in a new home. I only considered rent-to-own or seller financiing for these reasons. I live in tennessee, and here they have some rent to own properties that are new construction. I just didn't want to make a down payment and end up losing it over some stupid glitch in contract. It sounds like the majority of you don't think its a very good idea, so i guess I will just have to wait and see if I'll ever be able to fullfill my dream of owning a home. Its very frustrating because I have the money and the income for it. I litterally have no debt either. My past credit issues (3 year old bankruptcy and multiple paid medical collections---yes i tried the Hipaa process and it didn't work) are still haunting me.

Hang in there. And remember that not wanting to have a baby until you have more space and not wanting to have to move after having a child are "wants" and not "needs." If you truly want a child, they can fit just about anywhere. And...they're portable. They can move from an apartment to a house at any time. They don't care.

I have five, and we did it with very little space. We moved as the family grew. Now we live in a fairly large house that would have worked great for us when we had all five at home. Now, we have one left at home...and she will go off to college soon. It's not realistic to think we can have it all first...before the children.

Just something to think about...

Re: Rent to own programs

MattH — Sat, 01 May 2010 22:08:38 GMT

@Anonymous wrote:
thanks to everyone who has replied thus far. My problem is not my income or my ability to make a down payment. My problem is simply my credit score. I have baddies that wont fall off for years and I have done everything i can (taking the advice from this board) to get them removed. I have been unsucessful and have come to the realiztion that i just have to wait, and wait, and wait.

I am tired of living in apartments and want to feel like the money i am spending every month is actually going toward something. My husband and I were considering expanding our family, but can't do it without more space. I don't want to keep moving my family from place to place. I would like us to be able to be settled in a new home. I only considered rent-to-own or seller financiing for these reasons. I live in tennessee, and here they have some rent to own properties that are new construction. I just didn't want to make a down payment and end up losing it over some stupid glitch in contract. It sounds like the majority of you don't think its a very good idea, so i guess I will just have to wait and see if I'll ever be able to fullfill my dream of owning a home. Its very frustrating because I have the money and the income for it. I litterally have no debt either. My past credit issues (3 year old bankruptcy and multiple paid medical collections---yes i tried the Hipaa process and it didn't work) are still haunting me.

Remember that renting X square feet of space almost always costs less per month when all costs are taken into account than does owning the same amount of space, because part of what one spends on housing as an owner is really an investment. Therefore while renting you should be able to save substantially more per month, other things being equal, than you could as an owner. So your money should actually be going toward something right now: building up cash. If your cash position right now is not substantially stronger than it was 24 months ago, then you may not be ready to buy yet.

I suggest you figure out how much per month you'd need if you owned the home you envision, including loan PITI (principal, interest, taxes, and insurance) plus utilities, plus maintenance (anywhere from 0.5% of its value per month if it's very new and in excellent condition to maybe 1% or more of its value per month for an older house), plus any homeowners association fees, plus various other things. Since major maintenance does not happen in every month, a homeowner should be saving towards maintenance in most months to cover the times when some big ticket repair is needed. Anyway, talk to friends and relatives who own houses and find out how much in "surprises" they had to pay over the previous five years and divide by 60 to get a monthly number. Now compare that with your current housing expenses. Open a new savings account and every month without fail deposit in that account the extra dollars you'd need if you owned your home. This will let you practice ownership and experience how readily your budget handles the extra costs. AND when your FICO scores have improved enough to apply for a loan, you'll have more cash for down payment, closing costs, reserves, furniture, etc.., etc.

Also, be aware of the biggest financial downside to home ownership: unlike such investments as stocks and bonds, selling a home is costly and time consuming even when the market is a lot stronger than it is right now. Therefore in addition to running financial numbers you should also consider how stable your overall situation is: home ownership works best financially if you are highly confident you will spend at least 10 years in that house.