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How Rent-to-Own Works

What is Rent-to-Own and

How Does it Work?

Some of you may not completely understand what it is or how it works, or why you would want to do it in the first place.

First the why. For those of us that are at a point in life where our credit is damaged due to bankruptcy, divorce, medical bills, irresponsibility, depression issues, past drug or alcohol problems, the list is endless, Rent-To-Own could be our answer to home ownership and getting out of the financial mess we may be in.

The way it works is a seller or investor owns a home that he/she is willing to rent with the understanding that the renter also will buy the home at some point. The banks are having problems with money right now also, and most have no money to loan at the moment. The reasons are a bit complicated and a financial adviser can explain much better than I.

So, what happens is the renter/buyer signs and agreement with the seller that they are going to pay so much per month on the home. A percentage of that goes to rent and a percentage goes to the purchase. After a period of time, say 3-5 years, the buyer's credit will have improved if they are paying bills on time, paying rent on time, maybe borrowing for the purchase of small items etc. Just doing things to improve their credit for that period.

After 3 to 5 years, or whatever the agreement is, the buyer can then apply for a normal type home loan (Conventional, FHA, VA, CalVet, etc.)

The amount of the home is based on the initial price minus the deposit you made when you first moved in, and minus the amount applied to the purchase with each monthly payment. Remember, not all of your monthly payments are applied to the purchase during the Rent-To-Own phase, but a portion is applied to the purchase, and a portion is rent. Notice the deposit is generally applied 100% to paying down the price of the home, so the bigger the deposit, the lower the price when it is time to apply for a regular loan.

The advantage to this is the seller of the home carries the papers. This means much less paper work for you, easier to get approved for the plan, no banks or mortgage companies to deal with for now, and you still will be the mortgage holder with all the tax and home owner benefits.

If this sounds like something that is for you then let us help you through the process.

We have foreclosures that the banks and mortgage companies need to get rid of. They are costing them money rather than making them money. Some are 30%- 50% below appraised market value and they are motivated to dump these things.

I hope this clears up any confusion any of you may have had. If you have any questions, just drop me an email. If I don't have an answer immediately I will find out what the answer is and get back with you.