Rent to Own – Good Idea or Not?
Rent to own sounds like a really good idea until you start asking questions.
I get this question all the time and have never really had a discussion about it, until today. Let me start by saying that i’m not a huge fan.
I want to get that out of the way so that you understand that this article is only my opinion, and I am going to focus on the reasons why I’m not a fan of rent to own homes.
5 Reasons I Don’t Like Rent/Lease to Own
1. This scenario is “sold” to folks that cannot qualify for home loan financing right now. Paying rent to someone under the pretense that you will have the option to buy this home in a few years will DOES NOT help you to qualify for home loan financing. To me, this is a predatory tactic that preys on people’s desire to own a home when they can’t afford it at this time.
2. Lender guidelines are going to be extremely critical of a lease to own or rent to own down payment arrangement. The Lender may not accept the down payment source from the seller unless it meets strict verification guidelines.
3. In order for you to “save” money to be applied toward the down payment, you are required to pay higher than market rents – the excess is then applied toward your down payment savings account – make sense?
4. An “option” means that you pay a premium for the right to buy the home at a future date at terms that are negotiated at the time you sign the lease. This is a detailed legal agreement that requires that you fully understand the future ramifications of such an agreement. After the honey moon period ends, and you are now in a 2 to 3 year lease at above market rents, what if you don’t like the neighborhood? What if you don’t like the house?
5. Finally, what if the seller loses the home? This is something that I’ve actually seen. The “seller” is upside down on the home, offers a lease to own, can’t keep up with the payments then loses the home to short sale or foreclosure.
Too Much Risk?
If you are not in a position to buy a home now, do not enter into a high rent situation.
Forget all that. Save your money on your own. Fix your credit. You can start searching for your dream home once you are able to qualify for a home loan.
I invite anyone with a contradictory argument why lease to own is a good idea to challenge my beliefs here. I’m not saying I’m right about this, I’m just opinionated 🙂
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