Lease to own houses?? Anyone have experience buying one? (2009, foreclosure)

[GJAA]

Hi All,

Moving to CS in the beginning of the summer '08. Looking at doing a lease to own home possibly.... Anyone have any experience buying one in the area?? Was it a good/bad experience. Any thoughts, links, expertise, info on the process.. etc.

Reason being: 1st home purchase, can't count wife's income for another year... so it limits what the banks think we can afford. We've found pleanty of Lease/Rent to owns in CS and just don't know a single person who has done this.... (probably for a good reason)

Any info would be great. Thanks.

[Bob from down south]

I don't recommend it. A LTB means you rent the house, and apply payments above and beyond the rent towards purchase of the house. You will spend considerably more than if you just buy it outright with a good conventional loan. Many boilerplate LTB contracts also nullify the purchase option if you miss a payment...i.e. are late on rent even once. And they get to keep the money you already paid. All it takes is someone not posting a payment correctly, a mail problem, or even an unethical player in the process to put you behind the eight-ball.

I recommend you instead find a mortgage lender that does manual underwriting rather than just using the FICO score and income ratios that spit out the back side of their computer printer. There are lenders where a real person considers your special circumstances and is empowered to make a decision.

That said, with things as tight as they are now, you may need some offsetting strengths in other areas to swing it.

If you can't swing getting a mortgage, it probably means you legitimately can't afford it yet. Much better to rent something downscale while you wait for the wife's income to come up and then buy, rather than looking for some sort of stuntman loan product that might get you in over your head. The conventional qualification rules have served us (lenders and borrowers) well for decades.

Bob

[haselton]

As someone who has recently exited the mortgage industry I understand your situation. Bob was partially right, it is important to review any contract you sign (especially a L2O or a contract for deed) and its a very good idea to have a lawyer review the docs to ensure everything is up to snuff. Bob- there are many reasons why they need to wait to get a mortgage or cannot include his wifes income such as a part time job, commissions or self employment for less than 2 years. It has nothing to do with risky loans, etc. And very few banks will do "good old boy" loans these days unless you have tons of money with them, and even then only the really small ones might. I was just in cos a couple days ago to review the housing situation and found the rental home market phenominal with prices well below a comporable mortgage payment on the same house. I'm in a similar position to you and will most likely just rent and pocket the savings for a down payment in a year or two due to how cheap rent really is. If you really want to own look into a contract for deed rather than a L2own, there are more protections for you as the buyer (at least in Minnesota where I am coming from, but I assume its similar in Co.)

[Mike from back east]

Broad consensus among financial types is that nationally homes are 40-60% overpriced, especially relative to rents - confirming your view that rents are a phenominal bargain at this time relative to buying. Price deflation is a high probability, especially in places like FL, CA, etc.

That view comes from many sources, two current ones being:
- Housing prices to free fall in 2008 - Jan. 23, 2008

- VBrick Presentation
This is a 25-minute taped presentation, with charts, showing we are in the latter stages of a wave of bubbles, very interesting stuff and easy to watch and follow along.

[GJAA]

Originally Posted by haselton

As someone who has recently exited the mortgage industry I understand your situation. Bob was partially right, it is important to review any contract you sign (especially a L2O or a contract for deed) and its a very good idea to have a lawyer review the docs to ensure everything is up to snuff. Bob- there are many reasons why they need to wait to get a mortgage or cannot include his wifes income such as a part time job, commissions or self employment for less than 2 years. It has nothing to do with risky loans, etc. And very few banks will do "good old boy" loans these days unless you have tons of money with them, and even then only the really small ones might. I was just in cos a couple days ago to review the housing situation and found the rental home market phenominal with prices well below a comporable mortgage payment on the same house. I'm in a similar position to you and will most likely just rent and pocket the savings for a down payment in a year or two due to how cheap rent really is. If you really want to own look into a contract for deed rather than a L2own, there are more protections for you as the buyer (at least in Minnesota where I am coming from, but I assume its similar in Co.)

That's exactly where we're at. We can certainly afford a mortgage... but they are asking for a 2 year track-record with my wife's income... and we just don't have that.

[bashep]

The nice thing about contracts is that you put what you want in there. If you want to rent the house w/ the option to buy at the end, then you can put that in the contract. You don't have to pay a higher rent to have it go towards the downpayment or whatever. There are so many owners in COS right now that are just desperate to either rent it or sell it that they would probably allow for you just to pay rent w/ the option to buy. You would just put in the contract that you have the option to buy the house after two years for the amount that you both agree on. At which point, they will probably say, price to be determined by an appraisal when you are ready to buy it. We did it with our first home, we rented it for two years and then bought it for BELOW the appraised value, (they were nice people). If anything NOW is the time to make those kinds of deals because people are so desperate. I have a client that is trying to sell his house right now and has been looking at rentals in Northgate. They ran across 3 homes that the owners were willing to do that. Just depends on who you are working with.

[Bob from down south]

If you think the sellers are desperate now, wait until the Mar-Apr buying peak comes and goes at something less than 50% of its former self.

There's a wave of subprime resets building...the peak occurs in March. Many of those houses will start down the road to foreclosure in early 2008, hitting an already saturated market in late 2008 and early 2009. Add those to the swelling inventory overhang, and it could make it worth your while to simply rent and wait for the real gravity of all that inventory to drag prices down a lot further, regardless of whether you can qualify for a mortgage right away. There should be lots more deals out there after the sellers have been underwater long enough for the bubbles to stop coming up.

Bashep is right--you can put anything you want into a lease contract, but that will likely entail paying an attorney to write it for you.

[jimmer71]

Rent to own is great way to buy a home. As someone who sells rent to own homes and I know other players in town. My advice is to determine by getting to know the intention of your seller. A lot of rent to own investors sell with an intention to have people put down a lot of money then have the default in some manner. Our intention is help people buy the house. We've made lot's of exceptions to help people buy our houses. Be aware... It has been a great program for a lot of our residents.

[MMichelle]

I've known of many rent-to-own deals - never have I seen the tenant end up with the property. Yes, usually the rents are higher and the tenants may make repairs / improvements tothe property. (some of the repairs are good - some terrible) I've know of cases where the tenant has been in the property for as much as 5 years - but I've never known of a case where it goes on longer.

My advise is to rent if you can't buy. Any landlord who rents a property and later wishes to sell is going to ask the existing tenant if they want to buy the property before putting it on the market. Why wouldn't they?!?

[wcnwzrd]

my first home was rent 2 own and it can be a nightmare if you aren't careful. due to prior experience with a shady loan company. i always send any payments by mail via certified mail with a tracking number. about 4 months before we were at the end of our lease option we got approved for our loan but the owner tried saying that we had defaulted on the contract due to a late payment. wound up taking him to court to get the 8,000 we had into the property back. only thing that saved us we i had printed out all the infor form the post office stating when the payments were mailed and signed for. Also showed all attempted deliveries (some had two or three before the due date and finally signed for a day afterwords). If you do decide that option be very careful and do everything you can to make sure you are within the contract. i would also suggest keeping at least 2 months worth of payments in the bank account just incase something comes up you can still cover it.