kink hemophiliac: What You Need to Know About Lease to Own Homes AtHomeSense ...

If you?re in the market for a home you have two options available to you: put money down on a home and finance the purchase for up to 30 years or rent a home with an option to buy. Home renting with a buy option is also known as ?lease to own? a small, but increasingly popular way to make home ownership a reality for more people.

Lease to own is not always advertised and you may need to take the initiative to make this option happen. Let?s explore this matter further and review the advantages and disadvantages of this home buying strategy.

Why Lease to Own?

People who lease to own may do so for a number of reasons. Two are as follows:

1. Bad credit. You may want to buy a home, but your credit score is too low to qualify for a loan or at least a loan with a favorable interest rate. By leasing a home for a few years, you can work on repairing your credit and qualifying for a mortgage later on.

2. Not enough money. Your home dreams cannot be reached because you don?t have enough money to put down for a deposit. When you lease to own, a portion of the money you pay in rent each month is set aside by your landlord as your down payment. When you exercise your buy option, that money becomes your down payment and can be added to whatever other money you have managed to save.

How to Lease to Own

Rarely will you find a home listed for sale that will indicate that you can rent it, especially a lease to own deal. Generally, it is an idea you need to pitch to the owner through your real estate agent. Or, by approaching the owner directly. An owner might be receptive to this option if they have another home they?re ready to buy and can?t sell their own home. The owner may not require the cash a home sale would provide and might be receptive to your idea.

The owner may also simply be having difficulty selling her home and is ready to move on. Instead of being stuck in a home she no longer wants to maintain, she?ll rent it to you with an option to buy it.

When leasing to own, consider the following:

1. Agree on a price. If the home you?re interested in can be rented for $1,200 per month, your landlord may ask for $1,400 per month, setting aside $400 per month toward your down payment. You?ll also determine the price you?ll pay for the home once the lease expires and the length of the lease term. In this example if your home is valued at $160,000 and your lease is for three years than $14,400 will be applied to your down payment when you exercise your buy option.

2. Get the home inspected. You?ll need to have the home inspected although you will need to do that again when you apply for a mortgage. By having the home inspected, you?ll know what you?re getting into and can avoid surprises later on. You?ll work with your landlord to settle certain matters before you exercise your lease option, preferably much sooner than that.

3. Hire an attorney. You?ll need to retain the services of a real estate lawyer to draft a lease to own agreement that spells out the contractual obligations of both parties. Your attorney will go over your agreement and explain to you that if you don?t exercise your lease option, you?ll lose the right to purchase the home. You?ll also lose the entire down payment. Your attorney will ensure that you retain the right to walk away from the home if you decide not to buy it.

Precautions to Take

1. Lease to own is not without some risks. For one, the housing market could change and prices might sink. You?ll then have a home that is overvalued. An overvalued home is hard to finance as the bank will determine its present value and finance it based on what it is worth, not the deal that you arranged. To close the gap you might be forced to come up with a much larger down payment. If you lose your job when you?re ready to exercise your option, you may find it impossible to qualify for a mortgage.

2. The market might also increase, allowing you to lock in a good deal at today?s prices. You could come away with a steal if home prices suddenly begin to surge; there is no way to predict this, but if your housing market has bottomed out and demand builds, then housing prices could rise significantly. Buy the home and if you decide you want to move on, you can flip the house.

Final Thoughts

One big area of concern with a lease-to-own arrangement is who will pay for maintenance and repairs on the home? Your attorney will want to have this spelled out in the contract. Expect to put some sweat equity into your home, but also expect that you won?t get reimbursed for the work ? it isn?t your home, but it will soon be.

Stacey Edwards writes for Environmental Data Resources, an environmental issues company that provides information to consumers about Vapor Intrusion, Chain of Title and Phase I Assessments.

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