Rent-To-Own For Buyers
Do you dream of owning your own home? A place where you can grow your family and build memories? If you are tired of paying your landlord’s mortgage, are unable to get a mortgage due to poor or no credit history, or don’t have the 5-20% for a down payment then a rent-to-own program may be right for you.
With climbing house prices and tightening lending criteria it is becoming increasingly difficult to purchase a home today. If you’re tired of paying rent, and essentially throwing your money away, then a rent-to-own program could be for you. Through our rent-to-own program we can put you in a home today and set you on a clear path for success to qualify for a mortgage and purchase the home tomorrow.
How Does Our Rent-to-Own Program Work?
No rent-to-own program is the same. Rent-to-own programs are flexible and the way they’re structured depends on the agreement made between the ‘seller’ and the ‘tenant-buyer’. My team and I primarily use a tenant buyer first approach. Before purchasing a property, we work closely with you to assess your financial situation, assess what you can pay for a home at the end of the rent-to-own program and then help you find the right property to move into and call home today and purchase tomorrow. Throughout the process we work with you to ensure you are continuing to take the steps to keep on track with your finances from the beginning to the end of the rent-to-own program.
Key Points of Our Rent-to-own Program
- Rent-to-own Structure – Our rent-to-own program is a Lease Option program and consist of two main components; the Rental or Lease Agreement and the Option To Purchase Agreement. The Rental or Lease Agreement is the agreement that sets out the terms of the rental relationship you have with us for the duration of the program. As with any rental situation, you are required to make regular rental payments to continue living in the home. At the end of the program you will have the option to purchase the home for a predetermined price.
- Tenant-Buyer first – You are first a tenant (tenant buyer) who pays rent for the duration of the rent-to-own program. Unlike a standard rental situation, where the landlord maintains control of the property, you live in the home now with more control of the care and upkeep of the home, all with the support of my team should anything unexpected arise.
- Purchase Price – At the start of the rent-to-own program we work with you to identify what you can afford when you have the option to purchase at the end of the program, typically in 2-3 years. We assess the price of the home to be purchased today, using historical appreciation rates to calculate backwards from the price we determined you can afford at the end of the program. The predetermined price will be based on your current financial situation and how much it can improve, if you take the steps we recommend, to qualify for a mortgage tomorrow. Unlike rental payments, which can increase from year to year, you know exactly what you are paying and you may even benefit if appreciation rates increase beyond the historical average used to calculate the purchase price. Once we’ve determined the purchase price you can start shopping for your home with one of our real estate specialists!
- Initial Option Consideration – One of the main requirements to purchase a home is a 5%-20%, or higher, down payment. It can be challenging to save for this down payment. You’re saving for today’s price while home prices continue increasing meaning the price will have changed by the time you reach your down payment savings goal. Instead of struggling to save for a down payment before you purchase a home, in a rent-to-own program you pay a non-refundable Initial Option Consideration which is later applied to the down payment when you take the option to purchase the home. The Initial Option Consideration is a percentage of the home’s purchase price and the amount paid is negotiable.
- Monthly Option Consideration – In addition to paying the Initial Option Consideration, you will pay a non-refundable Monthly Option Consideration (MOC). The MOC is calculated by subtracting the Initial Option Consideration paid up front, from the down payment you will require to purchase the home, and then divide the remaining amount required for the full down payment, by the number of months in your rent-to-own program. This amount is then added to your monthly payments. The MOC payments mean you will pay more money each month (as rent + MOC) but you have the peace of mind knowing you are on track to save the correct amount of money for the down payment when you choose the option to purchase the home.
- Maintenance – If you are a new homeowner or you are moving into a larger home, i.e. from a condo to a single family home, a rent-to-own program can be an ideal learning situation. Typically, you are responsible for paying for maintenance, repair, property taxes, etc. Though you’ll have these additional responsibilities, my team will be here to support you through the process of learning the ropes of home ownership.
- Closing – If you have maintained all of your payments and fulfilled the steps required for mortgage approval then, at the end of the program, you will have the option to purchase the home for the predetermined price. Most importantly, you must qualify for the mortgage to successfully purchase and close on the property; your monthly option consideration payments must be paid in full, you must have maintained or improved your credit throughout the program and you must show the lender that you have reported regular income. If you meet all these requirements and are approved for the mortgage by the lender it’s time to celebrate. On the closing date set by the lender the home will officially be yours!
If, after learning about our rent-to-own program for tenant buyers, you are interested in purchasing a home with us, the following are the steps you will take in our program:
- Complete the Tenant Buyer Questionnaire.
- Complete the sample Income & Expense sheet. We recommend using a financial tracking program to keep track of your income and expenses. Most banks offer online financial tracking services or we recommend Mint.com which tracks income and expenses by linking multiple accounts directly to your Mint profile.
- Obtain your Credit Report. We recommend using Borrowell.com which provides ongoing credit updates, helps you track your credit, provides tips on improving your credit and provides credit offers for free.
- Prepare for an initial consultation where:
- We take the time to understand your needs & goals to tailor a solution for you
- We complete the application process with you
- A non-refundable commitment fee of $500 is made to start your journey to home ownership
- Assess & create mutually agreeable Rent-to-Own terms based on the information
- Provided in the financing application
- Lock in the purchase price of your new home NOW
- Discuss the amounts for: rent, initial and monthly option consideration
- Solidify an action plan for your road to home ownership
- Start shopping for your new home with our real estate specialists
- Access to every available listing on MLS, etc.
- Access to a private pool of listings
- Pay a minimum of 50% of your initial option deposit prior to making an offer
- Purchase of your new home
- Waiting period for inspection, appraisal & financing
- Prior to removal of conditions, pay the remaining balance of initial option deposit
- Finalize the amounts for: rent, rent credit, and option deposit
- Sign your new lease
- Sign your Option contract
- Solidify moving date & Get ready to move!
- Welcome Home!
- Thorough walk-through inspection of your property together
- Key handover
A well-planned rent-to-own program can be a win-win situation for everyone, whether you’re a home buyer, seller or an investor. Send a message or complete the tenant-buyer questionnaire today for more information on how to get started on your path to home ownership!
If you’re a seller interested in learning more about our rent-to-own programs read more on the Rent-To-Own For Sellers page.