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    • Are you thinking about renting a house with the option to buy? Rent-to-own homes intrigue homebuyers because they offer an alternative path to homeownership for people who might struggle to get a home loan. Let’s take a closer look at how leasing a home with the option to buy it at a later date.

      What is a Rent-To-Own Home?

      Let’s start by examining the basics behind renting to own a home. At its core, a homeowner contracts with a tenant to collect an additional amount of money on top of the rent each month. The tenant has the opportunity to purchase the property for a specified price at the end of the contract. The extra money goes toward the purchase price if the tenant decides to buy the house.

      This contract is most common in slower housing markets where the homeowner isn’t confident that the house will sell at an acceptable price. Rather than having the house remain unsold for months, most likely undergoing price reductions, the homeowner opts to give a tenant a chance to buy the house at a later date.

      Interestingly, both the homeowner and the prospective buyer take a risk with this agreement. The homeowner chances that the housing values won’t increase substantially before the end of the contract since the contract sets the purchase price. The potential buyer risks losing the down payment money if they can’t obtain a home loan or decides against purchasing the house.

      Renting to own perks

      The apparent benefit of renting to own a house is the opportunity to buy a home. Pursuing a lease-to-own option lets you begin paying for a house before you need to obtain a home loan, giving you time to strengthen your financial standing before seeking a home mortgage.

      You’ll also have the advantage of knowing the purchase price at the start of the contract. By agreeing on the future sales price at the beginning of the agreement, you’re in a strong position to put together a housing budget. Also, you’ll gain instant equity by purchasing the property at below current market value if home values rise significantly during the length of your contract.

      Wouldn’t it be terrific to get to know the ins and outs of a house before committing to a 30-year mortgage? By renting a home before you purchase it, you can get a real feel for the property and the community before you make your living arrangement permanent.

      The negatives of renting to own

      Unfortunately, there are also some substantial downsides to renting a house before you buy it. Here are some cons to consider.

      • Risk: You’ll lose all of the money that you’ve paid the owner if you don’t buy the house.
      • Price: You might not have room to negotiate a lower purchase price with the owner if housing prices are lower in your neighborhood when it comes time to buy the property.
      • Tied up funds: It might make more sense to use your extra funds to pay down debt and improve your overall credit situation.

      There are benefits and downsides to every real estate decision, and it’s up to you to determine if rent-to-own homes might work for your family. Keep in mind that there are also home loan opportunities available to buyers who might not have sensational credit and substantial down payment money.

      Home Loans are Available

      You might think that renting to own a home is your only path to owning a home due to lackluster credit and a lack of down payment money. The great news is that the chances are high that you can obtain a home loan that fits your budget and lifestyle. Indeed, there are tremendous financing opportunities available for a variety of home buyers, and you’ll likely find that it’s easier to buy a home than you realized.

      Partnering with a home loan expert is the key to locating available mortgage options. We recommend that you meet with a mortgage lender, such as us at Strategic Mortgage Solutions, as soon as you start to think about buying a home. The lender will examine your credit history, monthly income, employment status, and overall debt to income ratio to determine how much money you can borrow.

      Many home loans don’t require stellar credit ratings and down payment money. For example, an FHA home loan is a terrific option for many buyers. This loan offers:

      • Down payment of 3.5%
      • Low minimum credit score

      If you’re buying your first house, you might also qualify for lower mortgage interest rates and down payment assistance through programs run by the Oregon Housing and Community Services.

      Work With an Experienced Real Estate Agent

      Once you know how much money you can afford to spend on a home purchase, it’s a smart idea to work with a real estate agent who knows your local housing market and can help you to locate housing options that fit your budget.

      Expert real estate agents are pros at finding good quality properties that need a little bit of polish. You can often find a less expensive home in a desirable neighborhood that needs some cosmetic updating to shine.

      Another strong reason to hire a real estate pro when you’re buying a house is that you’ll get the benefit of an expert negotiator throughout the buying process. A top-notch real estate agent excels at making a real estate deal that meets your requirements.

      Last thoughts

      Lastly, rent-to-own homes come with benefits and downsides for a future homeowner. Make sure that you consider all of your options, including affordable home loans, to find the path to homeownership that meets your needs.

      Strategic Mortgage Solutions excels at matching homebuyers with terrific home loans. Contact us for honest talk about buying a home in the Eugene or anywhere in Oregon.