Rent to Own
What is a ‘Rent to Own’ program?
This is where you rent a home, but you also control the property by having the option to purchase it at any time during your lease period. The current owner cannot sell the home to anyone else since they are bound by an agreement to sell the home to you at a pre-determined price within a specific period of time.
How is ‘renting’ a home different from ‘renting to own’ a home?
The difference is that you will buy the property at the end of the term. So you will have to sign an option to purchase agreement, which will state what your deposit and monthly ‘option premiums’ will be. The deposit and option premiums will be counted towards your down payment when you purchase the home.
You are also considered to be the “owner” the day you first move in and you will have the freedom to decorate or upgrade the house.
In addition, your rent will stay the same until you become the homeowner at the end of the term.
Who should enrol in a ‘Rent to Own’ program?
‘Rent to Own’ programs are for people who are unable to qualify for a traditional mortgage to purchase a home. A few possible reasons could be low down payment, poor credit or self-employment. It can also be for people who cannot refinance their current homes.
How does your Rent to Own program work?
• Apply for our ‘Own A Home Soon’ program to see if you qualify. We will require employment, income and down payment verification.
• Once qualified, you will work with our real estate agent to find a house that fits our program and your budget.
• We will analyze the property and evaluate comparisons for the last 3-5 years to determine average appreciation, which will determine the future purchase price that the client will buy the house for.
• We will put together a preliminary investor package which has details about the tenant, property and a financial summary then inform our investors of the deal.
• Then we will submit an offer on the property.
• After the offer is accepted, we will finalize the investor package and present it to an investor in our network that is willing to help you acquire a home.
• The lease agreement is signed with the client to rent to own for a preset term (usually the time required to improve the client’s credit and build up a minimum of 10% down at the end of the term).
• Once the investor is satisfied with the deal, they will be assigned the offer.
• Client makes a monthly payment (market rent for that area) + option premium which goes towards the clients down payment. This amount varies depending on the initial down from the client (monthly option premium will be higher for lower initial deposit due to the fact that we require you to have a 10% down (minimum) at end of term).
• We will have one of our mortgage brokers meet with the client every 3-6 months to ensure that their credit score is improving. This check in will be done in person or by phone and will be added to their lease agreement to ensure that they follow through.
• At the end of the lease term, client will exercise their option to purchase and complete the journey to home ownership.
I want into the program but I can’t afford the monthly rent and option payments?
The monthly payments are calculated to be no more than 32% of your combined income. Your monthly lease rate is slightly higher than you would pay on a new mortgage, even when you include property taxes and insurance. So the payments should be affordable and if they are not then we would encourage you to consider selecting a more affordable home.
Can we still qualify for the program if we have bad credit?
Entrance into the program is dependent upon the amount of down payment, the ability of the client to afford the monthly payments and the client’s willingness to work with a professional to repair their credit.
What are some of the reasons I might be declined for your program?
Prospective rent to own clients typically get declined for 4 reasons.
• Insufficient down payment. The goal is to have you become a homeowner in 3-5 years. To accomplish this, we want you have to accumulated at least 10% of the purchase price by the time you are required to buy the home. Upon acceptance into the program we will require $7,000 - $10,000 if the future sale price is less than $300k and $10,000 if the future sale price is $300k or greater.
• The house that you want doesn’t meet a mortgage lender’s guidelines (too rural an area, a mobile home or in too a small city/town (population less than 5,000)).
• Your income is less than the minimum requirement for a house of that value. A good guide is to multiply your income by 4.5 to determine how much house you would be able to afford at the end of the term. ie. $100,000 (total combined income) X 4.5 =$450,000 (upper limit of home you could afford)
• You qualify for our program but are not meeting the required deadlines with regards to submitting necessary documents or funds needed. We can only work with those who are 100% committed to the program. Because we are 100% commmited to ensuring that the program will be successful. The documentation proves that credit, employment and down payment criteria will be met.