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rent to own homes


beeboah
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most "rent to own" homes are done by the seller/owner of the property. most require a large down payment. this may or may not be used towards the asking price. most require the amt in full within a few years where a bank allows 30 years. it's a great idea if your credit is bad..

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  • 3 weeks later...

If you're renting to own a property, and the owner defaults on his loan, you will be kicked out in the forclosure process and won't get a dime back in return. It just happened to my brother. He paid $5000 down and lived there 2 years. He was getting ready to buy the house when the eviction notice was posted on his door. The owner had filed BK7 and had been putting my brothers rent money in his pocket every month and not making the mortgage payment. My brother got a lawyer but had no recourse. Be careful. You are truly at the mercy of the homeowner. :?

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My Dad does this. Its actually a good deal if you use that time to rebuild your credit. As a matter of fact when he rents a house house he mentions this website as a resource to help rebuild their credit.

What happens is you have to pay usually 2 to 4 thousand down to get into the house. That money is put into an interest bearing account. You make your payments on time and at the end of your lease The money and interest is rolled into your down payment, but if you dont clean your credit and you are unable to finance the home when your lease is up then you forfeit the money and interest. Amazingly he has been lucky and the people have not trashed the homes and all have bought the houses at the end of the lease term. I wish I could have done this for me. But he live about 900 miles from me, so that was not an option. I had to clean up then purchase.

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My Dad does this. Its actually a good deal if you use that time to rebuild your credit. As a matter of fact when he rents a house house he mentions this website as a resource to help rebuild their credit.

What happens is you have to pay usually 2 to 4 thousand down to get into the house. That money is put into an interest bearing account. You make your payments on time and at the end of your lease The money and interest is rolled into your down payment, but if you dont clean your credit and you are unable to finance the home when your lease is up then you forfeit the money and interest. Amazingly he has been lucky and the people have not trashed the homes and all have bought the houses at the end of the lease term. I wish I could have done this for me. But he live about 900 miles from me, so that was not an option. I had to clean up then purchase.

This post really got me thinking.

Basically you're just leasing a house with a large downpayment. If your credit is really crappy, you'll probably need a large downpayment to get into it anyway.

You still need to clean up your credit (above 580) to get 100% financing.

The number of homes on the market available as lease-purchases are minimal I would guess.

I would assume the money paid during the lease period is actually building you a little equity in the house, but how much?

But anyway - at the end of the lease term your credit will either be good enough where you can and will qualify for financing the home you want or you'll be out on your butt anyway, and you'll have lost that large deposit.

My advice - if this is really the home you want, go into a lease purchase agreement, but because you'll be able to get something better at the end of the lease anyways, maybe it's better to simply rent to rent and buy at the end of the rent period.

If you've ever rented a home, you'll know most rental properties FEEL like rental properties. Not all - but certainly most. I wouldn't recommend 'settling' unless this is a home purchase you really think you would make if your credit was above 580.

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We did a rent to own and it turned out ok. We signed a lease agreement and moved all the paperwork through our attorney. We added the condition that the initial downpayment was to be put into an escrow account - which I highly recommend doing if you are serious about purchasing the home. The owners of the home then started pocketing the monthly payments we were giving them. We came home one day and had foreclosure papers on the door. The owners filed BK and the house went through foreclosure. We were able to purchase the home at $40K less than we had agreed to pay the owners. It was a very stressful year - yeah year. We did have trouble with the mortgage holder and their attorney and the owners refused to sign the deed so that we could go ahead and purchase the house prior to the foreclosure sale. That actually helped us with the purchase price. It was risky and we were stressed, but it ended up okay and now we own the house with $40K in equity to start off.

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Thanks so much for the post. I think you have "hit" upon the solution to the problem you metioned, which has happened fairly often.

Please fill in with more details as to how long the deposit was to be held in escrow and not given to the sellers.

Part of the contract should say that the payments are to be made through a bank or escrow company. The mortgage statements go there, your payments go there, and the bank pays the mortgage company. This way the mortgage company is going to be paid on time, and the owner is going to get their money, and the checks you pay with will be cashed in a timely manner.

Again, many thanks for the post.

Charles

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I saw a sign on my way to work about a lease to own new home. I immediately realized it's the neighbors down the street trying to sell their house.

my point is - not all these houses are complete dogs as my previous post might have made it sound. This particular house is less than 2 years old.

You can get lucky and find a good property like this, but these still will be hard to find. (this one - the owners moved to California and a previous sale fell through about 2 weeks ago)

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The homes that my father have are really nice. He just happens to get really good deals. He also rehabs the ones that need work before you buy it. You just have to shop around.

The money you pay during the lease goes to the owner. Its a little in their pocket But most of it goes to the mortgage on the house.

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There are some rent-to-own homes in my area. They are all brand new houses. They have people moving in them as soon as the construction is completed. The payments are high, but part of the payment goes towards the down payment after 2 years or something like that. I guess after 1 or 2 years, you can buy the home.

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I was Grace 0308 earlier - forgot my password and re-registered - I hope that doesn't confuse ya'll.

We had it in the contract that the deposit was to stay in eskrow until we actually purchased the house from the owners - this worked to our advantage as well in that the buyers were not able to get this money due to the foreclosure that they instigated. The $5k that we put into the eskrow account went back to us :D and we were able to use it as a down payment when we purchased the house from the mortgage company - which was Countrywide. (No, we did not use them for the purchase..)

As far as the payments, that was a mistake that we made. We knew the people that we were renting to own from and never in a million years suspected that they would put us in the position that we were in when they stopped making their mortgage payments.

We were on a 12 month contract and the payments were reasonable - of course we lost all of that money - but with the return to us of the $5K and the $40K in equity to boot - it was a small price to pay - and a lesson learned.

My husband and I have already started looking into this business of renting to own homes ourselves - can be very lucrative if it's done right.

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