Rent to own risk or reward

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.


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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


Credit Repair - Credit Law Center

5 Do’s and Don’ts of Buying a Home – Credit Law Center

Buying a home can be one of the biggest decisions you will ever make. Once you have decided to take the plunge and buy a home, there are some things you may want to avoid during the process.

We have created a list of the 5 Do’s and Don’t of buying a home.

5 Do’s of Buying a Home

1. Review and Monitor your credit report: Credit Reports contain errors, approximately 79% of all credit reports contain errors. To get the best interest rates you will need the highest credit score. Make sure you review your report and determine if all information is reporting accurate, timely and verifiable.

2. Manage your debt: Your revolving debt ratio makes up 30% of your credit score. Keeping your debt ratio as close to 1% will have the best positive impact on your credit score. Debt ratios about 50% will have a negative impact on your score, while anything under 30% will increase the positive impact.

3. Identify any negative items: Attempting to correct inaccurate information on your credit report during the home buying process may affect your credit scores and put an account in dispute.

4. Understand your credit scores: Over 90% of lenders nationwide use the FICO scoring model. Currently, FICO does not allow credit monitoring sites to use their scores. The scores you see online may be dramatically different than the ones your lender will use.

5. Seek Professional Help: If there are issues that arise in your credit before you can purchase a home, reach out to a professional.



5 Don’ts of Buying a Home

1. Don’t add any new debt: Buying a new home can be exciting. You can’t wait to decorate your home and furnish it, however, don’t let that tempt you in to opening a new credit card. Adding new credit and more debt can significantly impact your FICO scores. Try and refrain from using credit cards until after the loan is funded.

2. Don’t pay off old collections: Old collections may harm your credit scores if you pay them off. Paying off debts can affect the date of last activity on the account, and this could damage your credit scores.

3. Don’t shop around too much: It is true that you can pull your credit within 30 days, and it only counts as one credit pull, BUT inquiries over 30 days old may have an adverse effect on your credit score.

4. Don’t pay off your credit cards: A zero balance on your credit cards shows up in the FICO scoring model as “no data” which can lower your credit score. Keeping a balance of 1% of the available balance is the key number.

5. Don’t MISS ANY PAYMENTS: This is the most important thing to remember! Payment history accounts for the largest portion(35%) of what makes up your credit scores. A 30-day late payment can lower a score by 100 points and potentially cause you to lose the loan.

For Rent by Scammer - Credit Law Center

How to Avoid a Rental Scam – Credit Law Center

Trying to find a place to rent when you have less than stellar credit can leave you feeling hopeless. Finding a landlord that is willing to work with your situation may be a hefty task, but an important piece to this puzzle is knowing the red flags when it comes to rental scams. Scam artists are always looking for ways to prey on individuals, and rental scams are on the rise.

Craigslist and other online community sites are an easy way for these slimy scammers to prey on desperate individuals looking for a place to move. In doing my research I was disgusted at the numerous ways the rip off artists used to target individuals. Below I have listed a few of the ways they will target.

Common ways Scammers are Targeting Renters

Stealing an Existing Rental Ad

Some scammers will copy and steal images and location of a current rental home that is listed one another site. They will then post it on another site, with the same images, but change the price and phone number. They are slick and like to post a higher deposit, but a lower monthly amount. Scammers are looking for the fastest and less recognizable way to obtain the largest amount of money before you catch on to their scam. Occasionally, these scammers will hijack the listing agent’s email address.

Missing Landlord

These scammers look for vacant, bank owned homes and may even use their own home to show possible renters. They will take them to the vacant homes tell them the landlord is currently out of the country or sick, they will then request a deposit to hold the property and skip out. They will then take the down payment and never contact them again. Scammers often use their own house if they want to pull the scam more than once.


Red Flags

1. If they ask you to wire money. It is never a good reason to wire money, even if you already signed a contract.
2. If the landlord or agent asks for the first month’s rent and deposit before you have ever seen the property in person or signed an agreement.
3.They tell you the owner is out of the country and they are representing them.
4. Requesting you to fill out an application before you have ever seen the property.
5. If the price is too good to be true.
6.Sloppy ads misspelled words and not having pictures.


1. Do not rent sight unseen.
2. Meet the landlord in person.
3. Speak with current tenants, if possible.
4.Look up the current deed of trust in County records.
5. You may want to consider using a licensed agent or a reputable leasing company.
6. Do the basic research, google search the phone number and email address. Lots of times people use the internet to notify others of these individuals.

What to do if this happens to you

If you find yourself interacting with an individual who is trying to scam you, it is important that you report them to the local authorities and you may also report to the local utility company, so they can notify the proper owner of the circumstances. You may also want to report to the FTC.