Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
I glanced through the past threads on the mortgage forum and did not see this subject. So perhaps someone could enlighten me a little about the pros and cons of 'rent to buy'? Our daughter and her husband are possibly interested in a house that has already been reduced in price to $258.9K. However, that is still above what they can afford. Their affordability is maxed out at $190K. So we are wondering if a 'rent to buy' situation would help in any way. I would appreciate any comments you would like to share with us. Thank you!
I glanced through the past threads on the mortgage forum and did not see this subject. So perhaps someone could enlighten me a little about the pros and cons of 'rent to buy'? Our daughter and her husband are possibly interested in a house that has already been reduced in price to $258.9K. However, that is still above what they can afford. Their affordability is maxed out at $190K. So we are wondering if a 'rent to buy' situation would help in any way. I would appreciate any comments you would like to share with us. Thank you!
Best Regards,
Carter Glass
Generally not from what I have learned. Usually, there is a susbstantial down payment that is non-refundable (I've seen the average to be about $5,000) regardless if they decide to buy or not.
Then, the owner charges the renters what their mortgage payments would be
if they had to pay them (this would also include prop taxes & HOI). Some even charge interest. Most of the payment goes toward the owner's payments & a small portion the owner will put toward the renter's future payments, etc.
Your daugher & SIL need to get info on what they would be charged. Based on those numbers, they could figure out if this is a good idea for them.
While they have a very respectable figure to work with (my husband & I are also are the same number but where we are moving to has affordable housing in the areas we like. The areas we "love"; not even close ).
But, just keep in mind, the owner is trying to make a profit. They understand that the renter/buyer cannot afford a certain amount at this time, so numbers are sometimes "tweaked" to appear they can...
What if they decide NOT to buy the home...they have to figure out how much money they will lose & if it is worth it compared to their current situation. Isn't there anything in their price range?
I glanced through the past threads on the mortgage forum and did not see this subject. So perhaps someone could enlighten me a little about the pros and cons of 'rent to buy'? Our daughter and her husband are possibly interested in a house that has already been reduced in price to $258.9K. However, that is still above what they can afford. Their affordability is maxed out at $190K. So we are wondering if a 'rent to buy' situation would help in any way. I would appreciate any comments you would like to share with us. Thank you!
Best Regards,
Carter Glass
The owner would have to lower their price to $190K to make it feasible for them to purchase the house. A rent-to-buy lease would not work for your daughter and her husband at the present time because of the current listing price of the home. They would be paying an above-market rent for 6 months to a year during which they would have a portion of the rent credited towards the downpayment of the purchase. Your daughter and her husband would lose that downpayment when they found out that they couldn't get a loan to finance the home at $258.9K.
I glanced through the past threads on the mortgage forum and did not see this subject. So perhaps someone could enlighten me a little about the pros and cons of 'rent to buy'? Our daughter and her husband are possibly interested in a house that has already been reduced in price to $258.9K. However, that is still above what they can afford. Their affordability is maxed out at $190K. So we are wondering if a 'rent to buy' situation would help in any way. I would appreciate any comments you would like to share with us. Thank you!
Best Regards,
Carter Glass
Dear Carter,
By chance would they be first time homebuyers? If yes, they may be able to qualify for some downpayment and closing cost assistance. My daughter's family received a $40,000 grant as a 2nd mortgage, zero payments, zero interest which enabled them to purchase a home in a higher price range.
For rent to buy, I have helped buyers do this, but it's complicated and lengthy. Let me say in advance that I started as an investor, so I understand their process. And I'm no attorney, so I can't give legal advice. A possible scenario follows:
Get a written contract for the purchase of the house at an agreed upon price for closing to occur at a later date. In this market, a two-year closing would be preferred but the owner probably won't go further out than one year. Try to get at least 14-18 months. If a buyer has 12 months of rental payments, the lender can do a refinance for the purchase and the extra months will help the buyer get their financing arranged. The purchase price will be speculative (OK, what's the home worth two years from now in today's declining market). The contract will need a clause that says the home must appraise for the agreed upon purchase price or higher. Also in the contract, make sure there is a clause that says something about the escrow/downpayment being credited toward the purchase price. Any landlord/investor will try and convince you this is non-refundable, which is what they want you to believe. Many investors make their living on non-refundable options. Make sure the two following items are noted within the purchase contract so everything stays together and it's one transaction and not three separate.
Next, write up a lease agreement detailing who's responsible for what and when and how the monthly payments are made among other things.
Finally, you will need an option agreement that details how much of the lease payment will be applied to the purchase price and how and where the escrow/downpayment is to be held and how it will be disbursed if the transaction doesn't close. For Florida Realtors, this has to be done by an attorney.
Assuming buyers and sellers come to a meeting of the minds, have all the preceding documents recorded. This will protect the buyer's interest in case the seller defaults.
There's much more to it than this and it requires fierce negotiation. Find someone experienced to help you and it just might work for your daughter and her husband.
Good luck!
Karen.
Last edited by TampaKaren; 10-13-2007 at 09:23 AM..
Thanks to everyone who responded on my question. Tampakaren also wrote me a personal message, too. This is Saturday afternoon and so I have not yet been able to sit down and really study all of the information. So I will do that later.
with all of your kind suggestions, we were able to find a solution for my daughter and her husband. Since we live in DuPage County Illinois, there is a little known(?) homestead Financing Program for first time buyers. So go to www.dhoc.org for the information on this program. The added part to that web site is "/buyers.html". On page 7 of this document is the information regarding four mortgages in this program. So my youngest son (a mortgage processor) figured out that on the $258,900 house of my daughter's interest, it would only cost somewhere around $174K for the house. Some of those mortgage require no payment until the house is again sold. In fact, some charge no interest, either. So I guess in a way it could be called a termporary grant. If you are not interested in DuPage County (Wheaton, IL) then look for a similar program in your own county. THANK YOU SO MUCH... for your assistance!
with all of your kind suggestions, we were able to find a solution for my daughter and her husband. Since we live in DuPage County Illinois, there is a little known(?) homestead Financing Program for first time buyers. So go to www.dhoc.org for the information on this program. The added part to that web site is "/buyers.html". On page 7 of this document is the information regarding four mortgages in this program. So my youngest son (a mortgage processor) figured out that on the $258,900 house of my daughter's interest, it would only cost somewhere around $174K for the house. Some of those mortgage require no payment until the house is again sold. In fact, some charge no interest, either. So I guess in a way it could be called a termporary grant. If you are not interested in DuPage County (Wheaton, IL) then look for a similar program in your own county. THANK YOU SO MUCH... for your assistance!
Best Regards,
Carter Glass
Dear Carter,
I work with first time homebuyers as my way to give back and pay it forward. I'm also an advodate of affordable housing. I have a 3-inch binder chock full of programs that many have never heard of. The one thing I tell my first timers is, "No one knows you're a first time homebuyer if you don't say anthing." In Florida, a purchaser can also qualify as a first time homebuyer if they haven't owned a home in the past three years. Of course there are other factors. It's also not an easy process, but it's well worth the extra effort. Please tell them to hang in there and keep the end result in the forefront.
I'm very happy for your daughter and son-in law and great work by you and your son to help make their dreams come true. Please let me know how it goes.
Sincerely,
Karen.
Please register to post and access all features of our very popular forum. It is free and quick. Over $68,000 in prizes has already been given out to active posters on our forum. Additional giveaways are planned.
Detailed information about all U.S. cities, counties, and zip codes on our site: City-data.com.
Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
First time homebuyer?
Thx...made me feel good
