Find a Rent to Own Houses within a Few Miles of your Location
Updated: June 12, 2020 | Posted by: foodsupport.org | Related: Affordable Foreclosed Homes
Are you one of those individuals who are eager to own a personal home for their family? But, the high cost of mortgage and other housing fees are terribly upfront expensive. The reason of some Americans who are still struggling in paying all the house cost are due to the lack of information about the essence and importance considerations rent to own house.
In this home guide site, you will learn the process that you need to be considered in buying your own personal home and what factors may affect your decision. The guide will give you insights on the advantage and disadvantage of rent to own house. Learning all of these important elements of buying a house, I’m pretty sure it will enlighten your mind on the best things that you must always remember when choosing your dream house for your family or to yourself.
What is rent to Own House?
Basically, rent to own is also known to the market as lease to own or lease option. On the other way around, it is an unconventional way of owning a house aside from renting or buying a house. House experts considered that rent to own is a fusion of renting a house and the same time giving you an opportunity to buy it on the proper time. Eventually, the renter can pay a small amount for the upfront and during the leasing period. In this way, it will give an opportunity to the renter to receive a rent credit that could be used for the applying for other home expenses and other home benefits. On this matter, it gives also freedom to the rent to own occupants to transfer to other house easily. Many buyers, thinks that Rent to Own is more sensible in terms of finance than risking your finances in purchasing a home at the full high cost.
Four important steps on the process on Rent to Own House
Choosing the Right House
The role of the buyer is to find a suitable house through different ways. There are available house online and do some research to contact the seller for house visitation including the house location and neighborhood. You can contact different house seller to choose more option and finally choose the right one.
Terms and Agreements
The buyer must ensure the credibility of the landlord by checking all the pertinent papers about the house and public records of the homeowners. The buyer may ask for further information related to house before the final deal. The buyer and the landlord must agree on the terms and agreements including all the conditions of the lease purchase contract.
Lease the Home
After paying all the initial obligations including the option fee and signing the lease contract, the tenant may move into the house immediately. The tenant will be paying the monthly rentals and would gain credit for the future house down payment.
Purchasing the House
After the leasing contract expires, the tenants may opt to use the option fee and the credit from the monthly payments to buy the house. The tenants must apply for the mortgage loans and must pay all the obligations which including the closing cost, the tenant can now legally owns the house.
The basic elements of Rent to own Contracts
As we mentioned above on the process on acquiring the rent to own house, the lease of contract plays a vital role. A tenant must understood the terms and conditions including the necessary requirements. Through, different contracts may vary but on this guide, you can find the basic elements of a leasing contract and its requirements that will absolutely guide you in the rent to own house journey.
Every contract must have the elements of the following:
The tenants and the landlords must agree on the fixed price of the house that has an estimated amount to the future fair market value on the time that the lease contract expires. There are available Home Value Estimators for current fair market value while you need to consult a local mortgage banker for an accurate future fair market value of the house. Tenants must always remember that the price on the beginning and on the end of the lease contract must be locked at the same price. You must specify the different conditions to avoid lawsuits. Tenant should clarify on the obligatory matters on leasing the house that includes the mandatory purchasing the house after the leasing period but you could not afford when it time comes.
The tenant must check the amount set for monthly rental payment on the midst of the lease contract. The buyer or the tenant must ensure that the monthly payment is aligning base on the fair market value. Basically, if you are on the right track on the standard monthly rental payment, you may be eligible for the credits that you can use at the end of the lease contract for finally purchasing the house. Other things must be consider on standard rental:
Dates of payment of lease
Home actual mortgage
Other expenses, if necessary
This is to ensure that the house will not be foreclosed on the last period of lease and the house itself is not pre-closed at the beginning of the contract.
Maintenance and other home expenses
The tenants must clarify to the landlords who are responsible for the maintenance fee and other charges including utilities and property fees. Typically, the buyer has the obligation to all the maintenance of the house including the repairs and the cost of the utilities. You can check this website for the basic maintenance expenses on rental property, homeguides.sfgate.com. On the aspect of taxation, the landlords are accountable in paying necessary taxes including the real property tax and other insurance. To prevent any issues that would affect the leasing contract, the tenants and the landlords must agree and discuss the renter insurances and other policies.
You must remember that Option fee or option deposit is not optional, it is an obligatory fee for the renters to ensure an option on the leasing contract on the opportunity to legally own the house by purchasing the property. It is a non-refundable and may ranges from 2% to 10% of the purchase price. Option fee is very beneficial if you are eligible for the mortgage loans and able to purchase the house and could use the option fee as a down payment.
This premium rent is different from standard rent. Tenant must pay a premium rent which ranges from 15% up to 25% of the rent prices. In this case, the tenant will pay additional amount aside from its monthly rental. However, this premium rent would be beneficial as you decide to purchase the home during the end of the lease. The premium rent that you paid could be used to lessen the cost of down payment. If you opt not to purchase, the seller or the landlord may acquire the premium rent during the lease contract.
Buying the house
After you learned about the option fee, standard fee and the premium fee including the importance of credits, at the end of the contract if you decide to pursue to purchase the house, you have the total savings from the option fee and the credit that comes from the premium fee. In this way, it will be used to the total down payment of the house. On the matter of the not buying the house, you will lose your opportunity to get the option fee as it is a non-refundable fee and the credits.
Advantage and Disadvantage of Rent to Own
The following are the common advantages and disadvantages of rent to own house.
Building Equity and Good Credit
Lessen Financial Burden
Fixed price agreement
Subject for unexpected risk.