Applying for a rent to own option is much like applying for a home loan. The main difference is, the lender uses cash funding from a private investor to purchase the home. Because the stock market is doing so poorly, there may be additional funds available at this time. Because they use private investors, credit scores may be much lower than required for other types of loans.
Private investors look at this as a short term investment, usually 3-6 months. During that time, you agree to fulfill a credit repair program. This will guide you through a number of steps to raise your credit score and allow you to qualify for a conventional or FHA loan. When you are able to, you will apply for a loan through a lender, buy the home from the private investor and afterwards, take advantage of the tax deductions allowed home owners. Also any increases in equity when prices do rebound are yours, you need not share the increase with anyone. This will allow you to take advantage of the low housing prices we are seeing today.
With all investments there is a risk which must be shared by all parties involved. All investors will ask the Buyer to make a cash commitment. This is usually 3 to 5% of the initial purchase price of the home. Your cash commitment will generally be applied to the down payment on your loan, used to purchase the home from the private investor. If you fail to complete a credit repair program, miss payments, or the contract is nullified for any reason, your investment is non refundable.
Other expenses to consider when dealing with a rent to own option are closing costs, rent payments and credit repair fees. Because this is a service provided by a lending Broker, these fees vary based on a number of circumstances. Make certain you understand each of these expenses and how each is applied. This will provide you with information you will need to make a wise financial decision.
Contact me for more information or to schedule a showing. 414-426-1784
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