“Rent to own” a house is a very complicated process and normally takes place outside of organized real estate since there is no down payment therefore no commission until some hypothetical time in the future.
Rent to Own Homes
Rent to own a home involves having your landlord, after securing an agreement to purchase with an agreed-to price and closing date, place part of your rent on deposit. In order to get a mortgage, banks may need to see that the amount that is set aside for down payment is above the normal market rent for the property. (I.e. normal rent is $800 and your paying $1100 and $300.per month is set aside).
The reason the banks may look for this is to ensure that the down payment did not come about as a result of a kickback from the seller, unknown to the bank, with a corresponding “false” and inflated house selling price to make up the difference. This would be a case of fraud. This is one reason that banks have a home appraisal completed.
Other problems include the potential inconvenient answers to these questions, which have to be dealt with in the offer to purchase, or they will blow up later.
What happens if the market price of the home is less than I originally bargained for? Can I get out of the rent to own deal?
How can I predict what the interest rates will be in order to raise the amount of mortgage I will need at that future time?
Can I still get a mortgage if the interest rates go up for all that I need?
Will I get my money back if I can’t raise the mortgage?
What happens if the market price of the home is higher than what I originally bargained for?
What if the seller doesn’t want to sell since he knows its’ worth more than I bargained for?
What about things those go wrong with the house between now and then?
What is essentially happening in “rent to own” is that the landlord (seller) is saving money for you. This is something buyers can do on their own and maintain the flexibility of picking from many homes while working with a realtor at a time after pre-qualification takes place, which may or may not include the subject property.
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The above information is provided as a guideline and is not intended to give a professional legal advice. Please consult a real estate lawyer for their opinion on your particular case
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