Reconsidering Rent-To-Own│More Risk or More Reward?

Is Rent-To-Own A Sure Thing?

The here and now seems to take the front seat as opposed to decisions that are best for the budget for a lot of families.

“We need more space.”

“Our credit isn’t where it needs to be.”

“What is the quickest way to start building for our future and not funding my landlords retirement?”

Rent-to-own is here. But should it be the move you make?

What Am I Agreeing To?

Rent-to-own contracts can be a little misleading. As with any contract you sign, double check that everything makes sense and is conducive for you and your family in the long run.

Remember when you said you were not wanting to fund your landlords retirement? The typical lease a family signs is a 12 month lease. Anything after that is usually month to month or on extended terms.  With rent-to-own you are saying that you will lease possibly 2-3 years. At the end of those terms, then you have the option to buy it.

Most rent-to-own tenants have decided this option is best for them because they do not have a lump sum for a down payment or cash on hand.

Read further about a few things you may have not been aware of in the rent-to-own agreements.

What They Don’t Tell You

Although you are leasing the home this does not mean that by the end of the lease agreement you will still be approved. Although you did have the first pick on the home, they cannot guarantee that you are getting approved for the loan. This is no fault to the landlord.

If you were having a hard time getting approved for a loan before due to poor credit prior to the lease agreement and didn’t make any effort to work toward better credit, or something happened to your credit in the few years you were in the home, it won’t matter. Unfortunately, you will still be denied.

You will lose the money you put into the home as well.

Prior to signing your rent-to-own lease, you should still meet with a mortgage banker to know what you will need as far as payment, scores, etc. go to close when it comes time for the lease to end and the loan to kick in.

 

free credit repair consultation

The Fine Print

There are many things you need to go into detail with the seller on prior to agreeing to a rent-to-own home. As with a lease, there should be other factors taken into consideration prior to signing on the dotted line.

  1. Are there any liens on the current home?
  2. What will you do if you don’t decide to buy it?
  3. How does the home inspection work?
  4. How much will I buy it for?

Liens On The Home

This is vital! There should be no reason to argue over who owns the title to the home. Speak with someone about all the details, complete research and make sure you have a party involved that knows what they are doing. There are way too many scammers and companies out there that can lie and pull the wool over your eyes and you’re stuck with no where to turn when you thought everything was going to work out just fine.

Taking A Pass

Let’s say you lived in the home for a few years and decide you don’t want to buy it. What then? Double check that the contract has a clear and defined understanding of what will happen if you should choose to not purchase at the end of the lease. The unfortunate part is that the money you did spend is nonrefundable.

Inspection Time

As with any normal inspection, the condition of the home should be documented and photos should be taken off interior and exterior and any major concerns.

Purchase Time

You and the seller will decide on a price up front. With the purchase price being locked in, this does not protect you from the possibility of the home’s value dropping. If that is the case, it will not save you from the price dropping. You will still be held at the price that was decided on at the time of the contract unfortunately.

Not to mention, if the current landlord is not financially sound and possibly loses the home while you are the current tenant you most likely lose the option to purchase and again, the money is gone with the wind.

In Closing

There may be some benefits to your family signing a rent-to-own option but this is one to be weary of when walking through the process. There are home loans out there you can apply for that will work for you, especially if you are a first time home buyer. There are also options out there to not only help you improve your credit scores, but also work with you on smaller down payments and lower scores (although your interest rates will be higher).  If low credit scores are keeping you from improving your living situation, please contact us today for a free credit consultation. We have helped over 30,000 clients improve their scores. Let us get you back on the path toward financial freedom.

Check out Credit Law Center’s infographic on 4 myths of collections reporting on credit reports.
credit collection myths infographic

credit collection myths infographic

 

Low Credit Scores – Renting │ Not The Ideal Situation

Less Than Perfect Credit Scores and Living Situations.

Many families deal with tough situations when it comes to rentals and the landlords that come with them. According to the Business Insider, more Americans are renting than at any time in the last 50 years.  I can recall a time when I rented a home that had mice so big, that even the neighborhood cats didn’t try to catch them. My roommate and I had to put our fear and phobias aside and get rid of all the mice on our own. Maybe this is your current situation now, and your credit scores are forcing you to rent.

Are you currently living a rental nightmare?

We understand that this is not the ideal living situation.

At some point I lost track of the number of mice we ended up finding and shortly after, we were able to end our lease. Such is not always the case. Breaking a lease can be extremely difficult and some landlords are not as understanding. After many times of reaching out to our landlord with little to no help, we figured out a few things:

  1. Slumlords, as we call them, are only interested in the rent being turned in on time. (No, not all landlords are this ruthless, but you find while renting that few really care about the tenants residing in them).
  2. Quick fixes and patch jobs are ways they are able to make temporary fixes at little to no cost to them.
  3. With the demand and price being very high for a place to live, the quality of homes can be very, very low.
  4. Whether you are renting in a college town or a nice area in the suburbs, you meet less than perfect landlords. It is bound to happen!

 

So why are people renting more now, than they ever have?

These are just a few of the pain points that have been expressed:

  1. Poor/Bad credit-The inability to get approved for a home loan/mortgage.
  2. Lack of excess funds-Unable to make the down payment or fix things in the house once it is purchased.
  3. Lower expenses-Included in rent such as water or electric in most cases.

 

free credit repair consultation

These are just a few reasons why more people are currently renting. If you are in a position where renting is your only option, here are three things to take into consideration in an effort to make a change:

  1. Look into your state laws and know your rights as a tenant. Is your landlord hard to get in touch with? Do they fail to repair things in a timely manor? Each state has their own requirements when it comes to repairs on a rental. There is such thing as ‘repair and deduct’ which just means if you as the tenant pay for a repair, it can be documented and deducted from the rent. The landlord must know about the problem and it must be proven that the landlord failed to repair it within a reasonable time. If you are dealing with a lazy landlord or one that is hard to get in touch with, this may be something you deal with. Continue to reach out and attempt to communicate with them via email/phone. Document everything that happens and try to keep everything in text and email so there is written communication.
  2. Credit Repair with a Law Firm: A bad rental situation may have you interested in looking into buying a home. With a poor credit score, you may be far off from moving if you don’t take action now. With attorney-based credit repair, you can expect to see results between 30-180 days.  If you are unsure of what your current credit score is, you can pull a credit report here. Talk to a Credit Advisor today about what you can do to get out of your current rental and into your own home soon.

If low credit scores are keeping you from improving your living situation, please contact us today for a free credit consultation. We have helped over 30,000 clients improve their scores. Let us get you back on the path toward financial freedom.

Check out Credit Law Center’s infographic on 4 myths of collections reporting on credit reports.
credit collection myths infographic

credit collection myths infographic