Ever since the real estate crash, qualifying for mortgage has been much harder and more down payment money has generally been required.
This mortgage lending scenario shows no signs of changing in the short term future.
When you purchase a home with traditional financing, you will have many levels of qualifying standards to adhere to in order to get financing from a bank or mortgage lender.
They will perform a credit check, verify your income, review your bank statements, your tax returns and pay stubs and more.
And, of course, these checks are done to make sure the buyer can afford to make the monthly payments and to minimize the chance that the lender will have to take back the home through foreclosure.
And because of this very difficult to qualify lending environment, the dream of many renters to own their own home may seem like an unachievable goal.
Rent to Own Homes as a Buying Strategy But one possible alternative to the traditional home buying process is the popular lease purchase concept, also commonly called rent-to-own.
The concept of rent to own homes when buying a home is not new and actually has been around for a long time.
During the last big real estate boom, this way of buying a home kind of lost favor due to the fact that mortgage loans were so easy to qualify for.
But the fact is that even during the big boom, real estate investors have frequently used this method to sell many of the properties they invested in.
There are many terrific benefits of buying a home using a lease option agreement especially for a person or couple who may not be able to qualify right now for a traditional mortgage.
These agreements with landlords and homeowners are usually very flexible and understanding of past credit problems if you can prove yourself worth taking a chance on.
Landlords, investors and homeowners that offer rent to own homes generally want you to show that you are on the way back to financial stability by having saved some money.
By paying an "option fee" of usually 3%-10% of the house's purchase price, some home sellers will take a chance with people who are showing signs of recovering from their credit instability.
Once the lease to own agreement begins, the tenant/buyer will have anywhere from 1-5 years or more to live in the house, repair their credit and then qualify for a traditional mortgage or get owner financing from the owner.
This is a great way to test drive a house and the neighborhood before having to make a final decision to actually buy the house.
This because most rent to own agreements are structured as an option purchase, meaning the tenant/buyer rents the house for the agreed upon term and then has the option, not the requirement, to either get a mortgage or not get a mortgage.
Deciding to not buy the house does have a cost as the option fee paid at the beginning of the rental term is not refundable.
The great thing about rent to own homes as a buying strategy is that it puts you, the tenant/buyer, in full control of your situation.
You get to live in a nice house instead of continuing to suffer in an apartment while you get the time you need to fix your credit profile.