Читать книгу Rent-to-Own: How to Find Rent-to-Own Homes NOW While Rebuilding Your Credit - Wendy Patton - Страница 12

While buying your home on a rent-to-own basis can be a great solution for you, it isn’t the perfect solution for every situation. There are times when buying your home on a rent-to-own basis won’t work, though these largely depend on the seller and you. The following are reasons that rent-to-own would not work for you:

1. You can’t afford the home. Even if you can afford the rental payment, you need to make sure you understand how much the end mortgage payment will be, including property taxes and homeowner’s insurance. Sometimes the rental payment is much less than the mortgage payment because area rents don’t match up to area home values. Total up the costs of living in that home as a home OWNER, not just a renter, and make sure that total payment will fit within your budget. You can work with a mortgage broker to help you determine how much home you can afford. Also see Chapter 3 –“House Hunting Basics”.

Sometimes your payment will be higher than rent once you buy, but don’t let that scare you off as long as you can afford it. Homeownership is the best way to accumulate and save your wealth. If you are not a homeowner it is unlikely you can itemize your tax write offs. The tax benefits alone might make all the difference to you. In the long run, home ownership is usually the largest portion of a person’s wealth. Don’t let the opportunity to be a homeowner pass you by.

2. You don’t improve your credit while you are renting. If your credit is damaged before going into the rent-to-own home, that’s okay, but if you don’t take the necessary steps to get your credit straightened out while you are living in the home, you won’t be able to get a mortgage in the end. You must pay your bills on time. You also might need to do credit repair, which we’ll discuss later, in Chapter 17.

3. You overextend your credit during the rental period. When you move into a new home it’s quite common to want to decorate it with new furnishings. Beware of the pitfalls of adding financing to your debts for things like new dining room sets, sofas, appliances, large screen TVs or anything else. Just because the retailers are willing to extend credit to you doesn’t mean the mortgage lender is going to do so when you want to buy your home. Even if you make payments on time, if you still have the debts when it comes time to buy, debts only hurt you. Even a monthly payment of as little as $25 per month can actually reduce the mortgage amount you can qualify for by thousands of dollars! Remember, the more debts you have stacked up in your name, the less home you can afford, no matter how good your credit is. Hold on to your good credit and keep your spending and debt accumulation to a minimum.

4. You don’t pay your rent on time or at all. If you make late rental payments, the bank is not going to be inclined to give you a mortgage when you want to buy. Paying on time is critical to your success in getting a mortgage. Not to mention the fact that late rental payments might void your purchase agreement or option agreement depending on the terms. Not paying at all, obviously, will not only keep you from getting a mortgage, but it’s also going to get you evicted. You will also lose your option fee.

There are also times when a seller will not be able to do a rent-to-own. Here are some examples:

1. The seller can’t provide a clear title. If the seller can’t sell his home right now because he can’t provide a clear title, he can’t sell it on a rent-to-own basis either. Selling as a rent-to-own will give him extra time to remove obstructions to conveying the title, but he must clear them out. I do not recommend that you buy a home from a seller in this type of situation. It is a risk you don’t need, and there are many other homes available without this risk from which you can choose.

2. The seller owes more than the house is worth. This doesn’t make the sale impossible; but it does make it difficult. If the seller owes more than the house is worth, he would need to pay off the difference when you buy the home. The seller would need to bring money to the closing to make up the difference between what he owes on his mortgage and what you will pay for the house. If this is the case, you may want to insist the seller put that money into an escrow account so you know it is available when it comes time for you to buy. Another possibility would be that he overpays his monthly mortgage payments, so the difference would be covered by the end of the rental period. I do not recommend you buy from a seller in this situation, however. At the time you decide to purchase the home, the seller may or may not have the money to pay off the shortage. This would be a bad situation for you.

3. The seller is in foreclosure. If the seller has no way of making up past-due payments to the lender, he will not be able to sell his home as a rent-to-own. Note also that if the seller is able to bring his payments current, he MUST stay current during the option period. You certainly don’t want to be making payments to a seller only to find out he isn’t paying his mortgage! I will cover this situation and how you can protect yourself later in the book.

If you don’t make any of the mistakes listed above and your seller is not in any of the situations I described, you should be able to buy your next home on a rent-to-own basis.

In the next chapter, we’ll get into some of the nitty-gritty details about how rent-to-own works.