Are you a renter who has decided that it might be time to start putting your hard earned money into a place of your own? Tired of paying off your landlord’s mortgage? Have you recently tried to qualify for a mortgage to take advantage of the low interest rates but found that you did not qualify due to credit issues or you didn’t have the 5%, 10% or more down that the banks/lenders wanted?
You are not alone. There are more people in limbo who are tired of renting but unable to buy, than you may believe BUT what options are available to you if you cannot qualify for a mortgage today? Rent to own or lease to own is a great stop gap for you because it allows you to enjoy the benefits of home ownership today (YOU even select your own home), while you take the time needed to repair your credit and build up your down payment so you CAN qualify for your own mortgage at the end of the agreed upon term.
A good rent to own/lease to own program will support you in your credit repair efforts and help you save up a bigger down payment through your monthly payments.
Sounds great, right? Well it is but like anything, there is work involved on your part to make it all come together. Credit repair is not a hands off process and there is a commitment required in order to fulfill the terms of the agreement. For those that rent long term or have the “home buyer” mindset, this commitment should not be an issue at all. For those that frequently move from one rental to another, this will be their biggest hurdle.
Now is as good a time as any to look into your options and see if a rent to own/lease to own would fit your current home ownership plans. After all, we know that the housing market is healthy and is projected to continue to grow in 2015, so why not take advantage of opportunity to build equity in your own property before houses become even more expensive to purchase.
Rent or own or rent to own… that is the question…
BUT what happens if you choose to do nothing and continue to rent? There are those that believe they can save 10% or more on their own and while this is true for a few, life is life and expenses pop up, which cause many to struggle with the saving process.
If your plan is to continue to rent while you save a bigger down payment and repair your own credit, consider the “costs” that could come with that plan. For example, if you were renting a house for an average rent of $1500 a month, it would cost you $54,000 over the next three years in rent ($1500 X 36 months). How much of that is equity… ? Well, possibly all of it if we are talking about your landlord but zero for you, the renter. Beyond the cost of rent, homes will continue to increase in price (based on all the market information we have today). Consider 3%, 4% or higher depending on the area which means that the $300,000 house you are interested in today is likely going to cost $330,000 or more in three years. Fair enough we say but that will also impact how much you have to save for your down payment. On a $300,000 house, a 5% down payment is $15,000, in three years, on a purchase price of $330,000, the new 5% down payment that would be required would be $16,500. These numbers are even larger if the price appreciates more than the example of 3% and if you are required to put more down than the example of 5%.
It doesn’t cost you anything to set up a one on one call to have your questions answered and you may just find a new path to home ownership open for you when you thought there were none BUT the costs can be high if you choose to do nothing but continue down the same rental path.