Exactly what is rent to own homes in terms of credit requirements? When you have previous blemishes on your credit, you cannot necessarily qualify for any kind of mortgage loan. By using a lease to own house contract arrangement, you can move into the house you desire while you work on any credit issues.
While the average U.S. credit score is around 680, if you have a lower score you may not qualify for most typical mortgage programs. Normally this would disqualify you from getting a home, but with some creative financing options you can rent to own a home.
The decision to lease vs own can give you the ability to catch up on previous debts. When your debts become a high percentage of your income, it makes sense to work on paying them down before jumping into a mortgage situation. If you are negotiating your lease agreement, you can ask a purchase option to be included. The option allows you to make preparation for a future purchase at a set price. This can be advantageous since you are locking in a particular purchase price at the beginning of the option period.
Looking at what is rent to own homes will also give you an idea of the rent obligations you have for a give period of time. In some areas the rent tends to be higher than the typical mortgage payment. If that is the case, you may not have a lot of flexibility to negotiate the monthly rent, but it will allow you to get the house you want prior to obtaining a mortgage. In other instances, where rents are typically lower than the monthly mortgage payment, you can negotiate how far out you would like to extend your contract.
As with all contracts, there will be a time period in which you have to obtain financing. If you expect to have trouble, you may want to include an option to extend the rent purchase contract at a later date. With this option, you may have to provide a greater down payment or fee for the option contract. However you work out the details, it does give you some flexibility to move into the house you desire.
This is typically a good way to get into an owner financed situation, so that may mean you have even more latitude to negotiate.
This is typically a good way to get into an owner financed situation, so that may mean you have even more latitude to negotiate.