The typical rent to own buyer unfortunately wants to become a home owner but their credit scores are not sufficient enough to qualify for a reasonable mortgage at the present time.
The rent to own buyer will be need 6 - 24 months to rebuild credit, accrue monthly rental credits, and to save money for their down payment.
The advantage to the buyer is that they can live in the home now they get their financial affairs in order, lock the price and build down payment credits.
The seller also collects a larger, non-refundable option fee down payment from the tenant. The tenant now has vested interest in maintaining and buying the property from the seller at the end of the option period.
It is recommended that the rent to own buyer works with a prescribed lender and / or credit repair The seller should also be working with their future buyer to ensure they remain on track to purchase their home.
Due to the current ailing real estate market, it is critical that the rent to own buyer and the seller work together as a team. Some of the major issues everyone needs to pay close attention to are:
- If the house evaluated correctly? If the house does not appraise for the agreed upon sales price, the seller needs to step up and renegotiate or risk losing the deal all together.
- Is the buyer making on time rental payments each and every month? A good lender will be able to use this "on time" documented payment history to the benefit of the rent to own buyer at closing time.
- This is extremely important in assisting the rent to own buyer with building additional down payment funds.
- Is the seller meeting all all mortgage replyment obligations while the tenant is preparing to buy the home? There is a This is rare but it could happen ... be careful ... ask to see the buyers current mortgage statements every so often.
- Is the sellers title free and clear? This is a very important to look for because the seller could have difficulties closing if they have a big lien or judgment attached to their home.
The seller is able to sell his / her home creatively in a lower real estate market There are a few things to watch out for when entering into a rent to own agreement but for the most part. and the buyer locks into a price and has time to build their credit.
