When considering a Rent To Own you will have many questions. These are some important ones to keep in mind:
1. Does the company have inventory homes or do you get to choose your home? Sometimes, real estate investors will advertise a house as a straight rental or Rent To Own option. This could be a good opportunity to get into home ownership if the landlord is looking to sell in the next couple of years and you like the advertised home.Some companies, such as Sprout Properties, do not usually have inventory homes. We believe that the tenant buyer (person(s) in the Rent To Own program) should get to choose their home.
We work with licensed realtors, and always get a home inspection. A good Rent To Own company, with a great home inspector on their team, is going to ensure that you do not end up with a problem house (money pit). A great Rent to Own company will steer you away from problem houses-this is why Sprout Properties works with seasoned realtors and home inspectors to make sure you get the perfect home for you!
2. Does the company use any of your rent money towards the purchase of the home? Banks and lenders want to see deposits as separate payments made by you! If the Rent to Own company you are considering says they will credit a portion of your rent towards the purchase, then you need to ask how they will be recording that information. Double check with your mortgage broker/banker that they will accept this as savings! At Sprout Properties, we have two distinct payments made by you each month-one is rent and the other is a deposit that counts towards your purchase when you exercise your option to purchase the home. This leads into the next question…
3. Do you have to save your money on your own or will you be saving?Are you going to be responsible to save on your own? Some Rent to Own programs leave you to sort out saving your money. A hands-on Rent to Own company will help you save for your downpayment. Rent to Own companies often collect what is called an option consideration. These funds go directly towards the future purchase of your new home if you decide to buy it at the end of the program. Having a built-in savings plan ensures that you will be on track for success at the completion of your program. Like going to the gym with a fitness trainer, having someone by your side cheering you on and ensuring you are on track is going to ensure that you stay focused and meeting your goals.
4. How much percentage down payment will you have saved by the end of the program? At the time of writing this, many banks will allow individuals to purchase houses with as little as 5% down. You speak with your mortgage broker/bank and find out if you will qualify at 5% when you are planning to purchase your home. Rent to Own companies sometimes want to get you above the minimum that you need. You have to remember that you will have closing costs in addition to the down payment. A good Rent to Own company will educate you about this if you are unfamiliar.
Stay tuned for part 2-more questions to ask your Rent to Own company.
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