Structuring a rent to own agreement
January 8, 2015 @ 2:09 PM by:
Given the restrictions that have been placed on zero down payment mortgages over the last few years, rent to own options have been increasing in popularity as a way to purchase a home despite a lack of savings.
As a mortgage broker, I have seen dozens of these situations, but sadly few end up working out. Why? The biggest reason is the agreement has not been properly structured to be acceptable to a bank or lender. Sometimes the rent is not high enough, there is little documentation that has been put in writing, the agreement is not registered on title, or sadly enough some borrowers simply don't make enough or have strong enough credit to qualify for the financing at the end of the rental term.
I have several lenders I work with on a regular basis that are comfortable financing rent to own properties, but there are strict rules that must be abided by in order for the agreement to pass 'the smell test' when it comes time to get the financing approved to finalize the purchase.
If you are contemplating such an arrangement as either a buyer or a seller, please give me a call. I can help you put together an agreement that will lead to a successful transaction (not to mention that I will arrange the financing as well at a great rate).
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