Low Income Rent-to-Own Programs
Owning a house is something almost everyone dreams about. Unfortunately, most people, especially low income individuals, find it difficult to raise the amount required to purchase a home. Another added problem is that most middle or poor class Americans are more likely to be rejected when it comes to the process of borrowing money.
Rent-to-own programs allows for part of the rent, that the person would ordinarily pay, to go toward ownership of the house. Below, you’ll find the basics you need to get started.
The First Step
These days, traditional mortgage loan rates are on the rise while the loans’ eligibility criteria becomes stricter. It’s because of these two reasons that rent-to-own programs are gaining in popularity.
What Does Rent-to-Own Mean Exactly?
Rent-to-own is a program also known as “leasing to own”. The residents of a house are allowed to pay a set amount to the owners of the house for a particular duration of time. Part of this is rent and the rest is payment toward ownership of the house. The owner earns an amount from the rent and the rest goes toward down payment for the house. This helps the residents of the house to buy the very house that they live without straining themselves financially.
How Does It Work?
There are a few things that must be carefully considered before picking this as a viable option:
- The price of the property must be fixed. The owner and the buyer must reach an arrangement about the price. Once initial payments begin it’s very difficult to alter the prices later. In short -> Get it in writing.
- The seller must lock out all other buyers who are interested in the property. Once the person begins to pay the rent, then all other interested parties are disqualified.
- Part of the rent goes to ownership of the property and remaining amount goes to the owner in the form of rent. There must be an arrangement about what percentage is rent and what percentage is payment.
- The time duration in which the buyer pays off the full amount needs to be made clear. During this period the buyer is only a tenant and after payment in full, then and only then does he become the owner.
This method provides a lot of advantages to both the buyer and the seller. Buyers can improve their credit scores where as the seller will not have the burden of taking care of the repair costs of the house. In fact as far as the sellers are concerned, the house is sold upon first receipt of rent money.
The Importance of Paperwork
The agreement must be drawn up in a document form. Various other documents like the option agreement contract and sales contracts must be prepared with care so that no problems will arise in the future.
Before getting yourself involved in a rent-to-own setup, it’s best to consult a real estate agent or other specialist in the field. This will enable you to make sure that the prices are reasonable and there is no biases in the contracts.
Where Should I Start Looking?