Rent to Own at Cleveland Ohio Mortgage
What are the benefits to the tenant/buyer of doing a rent-to-own?
If you want to own your home and start building equity in your home, but your credit score does not allow for you to obtain conventional financing, you are left with very few choices if you want to own your own home. Buying a property “rent to own”, however, supplies you with many benefits that should not be ignored. Quite often, by using rent to own, you will build just as much equity as a typical home purchaser would build in the first several years of home ownership. Remember, you are receiving credit towards the purchase price for your initial down payment and the rent credit. A new conventional purchaser is receiving very little principal reduction in their loan during the first several years of home ownership. Just look at any lender’s mortgage loan amortization schedule and you will see the comparison. Here just a few of the additional benefits for the tenant/buyer:
- Rent money is working towards purchase: Every month a portion of your rental payment is usually credited towards your down payment or off of the sales price.
- Option money is credited towards purchase: When you sign a contract, you will pay the seller a non refundable deposit. This money is your vested interest in the home and is usually fully (100%) credited to you when you buy the home.
- Minimum cash out of pocket: When you purchase a home the conventional way, you may have to put a percentage down plus closing costs. When you buy doing a rent-to-own, you only pay first month's rent and a deposit. You can then refinance into the home using its equity for closing costs. This will save you a significant amount of money out of pocket every time you buy a home.
- Frequently no down payment at close: Since you have given the seller a deposit and you have been building equity and receiving monthly rent credits, there will frequently be very little or nothing left to pay for a down payment at closing.
- Profits from appreciation: Since the sales price is locked in before closing (as specified in your agreement), any increase in property value will mean that your equity (what you owe minus what it's worth) is increasing in the home.
- Possible sale for a profit: If you are allowed to sell (assign) your contract (it will be in your agreement), you may sell it to a third party for a profit.
- Credit problems okay: Qualification restrictions simply do not exist. You will be approved at the sole discretion of the landlord/seller.
- No lengthy escrows or mortgage approvals: Your approval will be based solely at the discretion of the landlord/seller instead of a lender who can take up to a month to render a decision.
- No taxes, less liability: Since you do not completely legally own the home (yet), you will not have to pay property taxes and your liability exposure will be dramatically reduced.
- Quick move in time: You can typically take possession of the home in a week or less after your offer was accepted, instead of conventional move in times of one to three months.
- Maximum leverage: You are spending very little (or zero) money to control a potentially very expensive, and very profitable, piece of real estate.
- Time: Before you actually buy the home, you will have 3-36 months (depending on your agreement) to repair your credit, find the best interest rates, investigate the home, and research the neighborhood and/or schools.
- Minimal maintenance: Large maintenance problems or any maintenance problems that exceed a certain amount of money will be the responsibility of the landlord/seller.
- Privacy: Your name will not be on the deed or in the public records until you exercise your option to buy. This will protect you from creditor liens, until the tenant/buyer can fix their financial situation.