Q: What is the Rent-to-Own Process?
Q: What are the benefits to renting-to-own as opposed to just waiting until I qualify for a home outright?
ANSWER: There are numerous benefits to renting-to-own:
ANSWER: The qualification process is quite simple…from your application we will verify rental history, employment/income and background/public records. Plus we’ll have a credit repair specialist review your reports to make sure we’re setting you up to win with enough time and a game plan on what you need to do regarding your credit.
* HOT TIPS * to get your application processed quicker:
Q: I have challenged credit. How good does one’s credit score have to be to qualify for your rent-to-own program?
ANSWER: It’s not so much the score that we look at…we’ve seen scores around 500 (even below) be restored to the mid-600′s in less than 9 months…even with folks who have bankruptcy and foreclosures on their records! Credit IS repairable if one is committed to a solid plan of action. Restoring one’s credit doesn’t happen over night which is why renting-to-own is perfect for such a situation.
What we look at with your credit situation is: what needs to happen/be disputed/be paid off/be added etc to get the score higher and to a lendable level? Some repairs/corrections can happen pretty quickly. We’ve had clients restore their credit in a matter of 3 months! Other situations will take longer. Everyone will be different so that’s why we get you a FREE analysis from credit experts.
We have an EXCELLENT credit repair company we can refer you to if you’re not already working with someone. They do FREE consultations and can get started on your credit repair right away. Over 90% of our clients can repair their credit within 12 months or less! You just need to do your part! We get you connected to an owner with at least an 18 month contract, so that’s plenty of time. ***BONUS!*** Most times, we’re even able to get your credit repair expense to count as part of your option down payment!
Some of our Sellers will require that you be enrolled actively in a credit repair program throughout the term of your rent-to-own agreement. We’ve done TONS of research, tried out several companies and one by far stands out among the rest in terms of RESULTS and AFFORDABILITY. Please check out why we refer our clients to New Beginnings Consultant Company a Credit Restoration Company by clicking HERE.
There are some clients who need more than 18 months to repair their credit…let’s say they had a bankruptcy last year and need to wait at least 2 years with a solid payment/new credit history before they can be lendable again. No problem! We make sure we match those clients up with a home whose owner is willing and able to extend or start off with a longer term. Again, the beauty of how flexible and customizable a rent-to-own transaction can be is one of our favorite aspects of our rent-to-own program!
Q: How do I secure the property?
ANSWER: A property isn’t taken fully off the market until contracts are signed and all funds are in escrow. Very rarely is someone NOT approved because our rent-to-own program understands and is flexible with damaged credit and special situations. The greater challenge will be other applicants beating you to the punch!
Q: What contracts are signed to seal the deal?
ANSWER: Rent-to-Own is also referred to as a Lease-Option transaction. The contracts include a Standard Lease/Rental Agreement with an Exclusive Option to Purchase. You lock in the price and terms for 18 months (or more), depending on the owner. Most of our terms are for a year and a half. Some of our owners can be even more flexible and can do a 24 month term with the option to renew for two 12-month extensions, too.
ANSWER: Every Owner is different and every home is different. Typically somewhere between 3.5%-7% of the option price is what the owner is looking for as an option down payment (sometimes referred to as an “option fee” or “down payment”). We have found that the higher the option down payment (especially if it’s MORE than the minimum), the more flexible our owners can typically be on the terms. Your are going to need these funds anyway in order to exercise your option, so the owner is simply requiring that this be taken care of up front. Plus it’s easier and quicker to get qualified for a loan as 100% of your option down payment goes towards the contract price when you are ready to exercise your option.
In order to be competitive with other applicants, we encourage you to save up at least $5,000 (plus first full month’s rent) at a MINIMUM for city properties and $7,500 (plus first full month’s rent) for county properties. Again, it’s not that the owner won’t work with you for less. It’s just likely though that there are other applicants who are at least offering those amounts.
Q: Can I use my 401k funds for my option down payment?
ANSWER: Yes! Many clients have taken out loans from their 401k plans for their option down payment. Some retirement funds will also allow you to take a distribution without penalty, too, because you’ll be able to demonstrate that these funds are going towards a home. Also, for applicants who have recently changed jobs or are about to change jobs, you can elect to take a full or partial cash out distribution rather than rolling over the funds to the new company. Whatever the situation, we definitely recommend consulting with your administrator first to find out all the eligibility and any other requirements that may be involved.
Q: What happens if my application is turned down?
ANSWER: First thing to clarify…”turned down” doesn’t necessarily mean that you are not approved for our program overall. To date, the only applicants who have not been approved for the program were the ones not honest on their application. Others have been “turned down” because the owner had to choose between multiple APPROVED applicants because, of course, only one family can get the home. In that situation where an applicant is not selected, they have the choice to get their escrow funds back immediately or the funds can remain in escrow until another home becomes available. When that happens, the application is already processed and nothing further is needed. You just give us the word and we’ll present your application to the new owner and typically they are delighted to have a qualified applicant ready to go!
ANSWER: In general, if there are no delays an application can be processed in as little as 48 hours and be ready to present to the owner. The final decision does not lie with us and once the completed application is in the owner”s hands we all await his/her decision (which usually doesn’t take long).
Please note that each application must be complete (all fields completed, last 2 pays stubs submitted, and VOR authorization form submitted), before processing begins. Complete applications are processed in the order received, however those applicants who already have funds in escrow do get bumped up in priority. Additional applications will continue to be accepted until the owner approves an applicant, contracts are signed and all funds are tendered as agreed. If contracts are signed but only partial funds have been received, back-up applications are accepted but it is disclosed the property is under contract.
Processing can take longer if a complication arises such as difficulties contacting your current and/or past landlords. Also, a copy of applicant’s driver’s license or other federal issued ID will be required at contract signing and will become part of the completed application. All information submitted on the application is subject to verification. Applications will be declined and not presented to any owners if we discover any information submitted was falsified, purposefully incorrect, dishonest and/or misleading and the applicant will be charged a $25 application fee and any other associated processing fees as allowed by law.
Q: If I am rejected for some reason or change my mind before signing the contracts, how long before the escrow funds would be released back to me if I’ve already made a deposit?
ANSWER: Escrow funds are immediately refundable to you upon written request. We simply fax a release document to the escrow company. If all the paperwork is in order, your escrow refund can typically be mailed out to you the same day you requested it. We always have clients deposit certified funds or cash (no personal checks or checks drawn from a credit line) so that there are no holds on the funds. For example, if you deposited a local personal check and then wanted a refund one week later, you would most likely have to wait 1-2 weeks until verification was received that your original funds cleared. Funds drawn off a credit line can have up to a four week hold! But since we require certified funds or cash, there typically is no delay whatsoever.
ANSWER: WE CURRENTLY DO NOT DO RENT CREDITS. In the past sometimes the owner will offer what is commonly referred to as a “rent credit”. Many times this will depend on your final option down payment amount. Let’s say the owner agrees that for every monthly payment made by the 1st of each month, the owner will reduce the option price by $150.00. That $150.00 is what people call a “rent credit” but technically it’s not a credit, just a reduction in purchase price. So let’s say you purchase the home during month 18 of your agreement and have made ALL of your payments on the 1st of each month. The owner would then reduce the purchase price by $2,700 (18 x $150.00). So if the purchase price is $185,000 then it would be reduced to $182,300 and 100% of your initial option down payment is now applied towards the LOWER option price! Another option you may have is to keep the option price the same, but have the owner pay $2,700 of your closing costs.
Q: Is my option down payment/option fee applied towards the purchase price?
ANSWER: Yes! 100% of the amount that is submitted for the option down payment/option fee goes towards the house!!! This is clearly and explicitly written into the contracts.
Q: When it comes to a move in date, do you recommend moving in on the 1st only?
ANSWER: No, not necessarily. You can move mid-month or any day that best suits you. You submit the first FULL month’s rent prior to move in, but your next monthly rent payment due the following month will be a prorated amount for whatever days you actually occupied the home in that initial month.
ANSWER: Since our homes tend to go fast, we recommend to start looking at our homes when your move date is around 30-45 days out, no more than 60. The last thing we want to do is show you a home that you absolutely love and want, but someone who can move in sooner takes it off the market before you’re in a position to move. However, it is possible to have a owner hold a property for you, but it would require your full option down payment plus first full month’s rent, plus signing contracts at the very least. It’ll all depend on how much that ends up being and exactly how long you’d like the owner to hold the property for you.
Q: Am I financially responsible for repairs during the rental period?
ANSWER: For the first 30 days anything and everything materially affecting the livability of the home is 100% on the owner. After that, the home warranty in place typically covers everything else…you just pay the deductible (typically $75-$100 per claim). With a property that has been completely renovated (where everything is brand new) sometimes the owner opts not to have a home warranty because everything is covered by the Manufacturer’s Warranty.
Q: Can I have the house inspected by someone before making a decision?
ANSWER: Absolutely. Keep in mind, whenever required by state/county law, our owners have to obtain a rental license and pass any required property inspections for that license or registration which may or may not include a lead inspection. But you are welcome to complete your own for your own information’s sake. Just let us know when you’d like to conduct the inspection and we’ll make sure the home is accessible.
Q: Is it okay to run my business out of the house?
ANSWER: Generally…yes, but it is a case by case basis. The businesses that get turned down typically are day care businesses due to the liability incurred for the property owner.
ANSWER: Most people don’t know all that’s involved in purchasing a home…lenders, appraisers, inspectors, surveyors, title researchers, and of course the attorney are required to get involved and of course have to be paid. Thankfully, most of them don’t need to be paid up front…they get paid at closing…hence “closing costs”. Even though with rent-to-own you are likely getting any loan down payment requirement out of the way up front, you still want to be setting aside funds for closing as not all loans allow you to roll these costs up into the loan.
The best resource to get the most accurate estimate on your closing costs will be from your mortgage broker or lender. We are not a lending institution so we are unable to provide you with what is called a “Good Faith Estimate” which typically outlines your future mortgage payment and anticipated closing costs.
We have no idea what the loan fees will be, as they are totally dependent upon your lender. However, it is possible to negotiate these fees down. Be sure to ask if the owner has a closing company that will offer a discount on the transaction.
Please email us anytime if you have any additional questions! We look forward to finding you the perfect home!!!
Find Me A Home and Get Pre-Qualified
A very important step in the home-buying process is to get pre-qualified for a mortgage:
This will give us an idea of the price range that you can afford so that we can go out and find the best deal on a home that is right for you.
Getting pre-qualified will require that you provide a lender with some basic information on your income, assets, and debt. We can arrange to have this done for you at no cost.
Another benefit in getting pre-qualified is that it is an expression of your seriousness in purchasing a home, which may be a deciding factor in a situation of competing offers from other not-yet qualified buyers on your dream home.
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