Denver Rent To Own Home

Denver Rent To Own Homes

Rent To Own Homes And Lease Purchase Options have become evn more popular in recent years because it represents a financing solution for buyers and sellers outside of a more and more restrictive mortgage lending environment.Those in the following situations may benefit form looking into a Rent To Own or Lease Purchase arrangement.

•  Past Credit Problems
 No Employment History
•  High Down Payments
•  No Credit History
•  Self-Employment
•  Own More Than One Home

 Commission Income

 

Denver lease purchase home

A Lease Purchase Option provides you with many features and benefits, but perhaps the most powerful one is the rate at which you accumulate equity.

Compare any lender's loan amortization schedule to most Lease Purchase contracts and you'll quickly see that the Lease Purchase contract builds equity faster in earlier years.

Moreover, the buying power of a Lease Purchase contract can quickly and easily land you a home that you would never qualify for the conventional way. Sellers have the advantage of offering their home to a wider group of buyers not shut out by tight lender credit restrictions.

Rent To Own Home Advantages

  •  Immediate Occupancy

  •  Easier To Qualify For Than A Traditional Mortgage

  •  Repair Your Credit While Living In The Home

  •  You Can "Try Before You Buy"

  •  Build Equity From The Beginning

  •  A Path To Home Ownership Not Just Paying Rent

  • More Potential Buyers - Credit Is Seller's Option

Rent To Own Homes And Lease Purchase Homes In Denver Colorado

Aurora
Broomfield
Lakewood

Englewood
Applewood
Golden

Wheat Ridge
Westminster
Northglenn

Arvada
Sheridan
Thornton

Rent To Own Homes

Although there is no standard for a Rent To Own Home Agreement, many contracts contain common provisions. In general a Rent To Own Agreement allows a tenant to become a homeowner if certain conditions are met. Those conditions usually require the tenant/buyer to pay an initial Option Fee and a monthly lease payment for a specified period of time.

At the expiration of the lease period the tenant has the option to purchase the home for a specified amount. Financing the purchase at this time requires the tenant to secure a loan through a bank, mortgage lender or other outside source.

The Lease Option

The Lease Option is a term that actually would be better described as the Purchase Option. This can be contained within the Rent To Own/Lease Agreement or exist as a separate contract. This provision normally stipulates the tenant/buyer's right to purchase the home for a specified amount at the end of the lease period. There is usually a fee attached to this known as the Option Fee.

The Option Fee

Although the Option Fee is normally paid at the beginning of the lease period it should not be confused with a Rental Security Deposit. The Option Fee is a fee paid for the right to purchase the home. It is usually not refundable. In some cases it may be applied as a credit towards the purchase price of the home.

Monthly Rental Credit

In many cases Rent To Own Agreements will contain a provision that designates a portion of the monthly rental payment as a credit towards the purchase of the home. This amount varies and can be as high as 50% of the payment.

The advantage to the tenant/buyer is the ability to begin building equity in the home during the lease period, usually at a faster rate than a standard mortgage. It is important to note that if the option to purchase the home is not exercised that the credit is lost.

Hypothetical Example

Our example illustrates a home with a selling for $200,000. A 3% Option Fee would equal $6000. This amount is paid at the time that the lease begins.

The monthly payment on the home in this example is 1% of the selling price. This generates a monthly payment of ($200,000 x 1%) or $2000.

In our example the investor is going to allow 30% of the monthly payment to be credited towards a down payment on the home when the buyer purchases it. The down payment credit would be ($2000x 30%) $600 each month.

We will assume that the rental or lease period is 24 months. In this case the buyer would pay a $6000 non-refundable Option Fee. They would pay 24 payments of $2000/month . At the end of the 24 month period the buyer would have the option to purchase the home for $200,000. During the lease period they would build up a total down payment credit of $14,400 ($600 x 24 months). At this time the tenant/buyer would need to secure financing to purchase the home from a bank, mortgage lender or other source.

Things to Consider

A Rent To Own Home can be a great way to start on a path to home ownership. The down payment can be made gradually via the Monthly Rental Credit during the lease period. Qualifying for a Rent To Own Home is based more on the ability to pay rather than credit scores. Another advantage is the ability to "Try Before You Buy".

Keep in mind that if you do not to purchase the home at the end of the lease period you can lose your Monthly Rental Credits. At this time your credit must allow you to qualify for a mortgage. Considering this fact it may be an advantage to monitor your credit though a reputable and established credit repair resource

 

Rent To Own The Right Way
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