With current price increases that can be done most people to stay financially financially. So how do young couples save enough money to enter the housing market? Sometimes you have to think outside the box and produce creative financing options. One example is rent-to-own, or rented home purchases.

Basically, in this scenario, landlords and tenants generate an agreement to buy a house in a specified period (usually 3 years or less), for a certain price. The cost of option 1 to 5% of the price is credited to the purchase price and premium added to the lease payment to accumulate the deposit. If the buyer steps back from the purchase agreement, they lose the cost of the option and rental prices.

Distinctive Rent-to-own contract features

Rental prices and homes are usually established and documented based on market value plus negotiations between buyers and sellers.

The rent-to-own contract will have a period of options where the borrower can build equity while staying at home. After the period of the option ended, the borrower relied on successfully eligible for a mortgage to buy a house. It is very important that the borrower has a good idea about their ability to take a mortgage; Talk to the lender before entering your own lease agreement to examine your financial situation. You may only need to increase your credit rating, and this can be done by making a minimum payment on time every loan or credit card every month.

Often lenders want to see that the amount above market rental prices has been set aside. This ensures that the seller does not provide borrowers with kickback with artificially inflating selling prices. Usually the bank will also ask for an assessment for this reason.

If at the end of the option period, the buyer finds a problem with the house, it may be cheaper to stay away from the agreement rather than buying a house that can develop into a money hole.

The house selling price is agreed at the beginning of the option period. This means that after the 3-year option period if the house price drops the borrower can request a down payment based on new values. For example, a 5% payment for $ 225,000 houses will be $ 11,250. If the house falls 3% in value, or to $ 218.250, a down payment of 5% of this will be $ 10,912 – carrying a maximum loan amount to 207,338. You need $ 225,000, now you have to make a difference.

However, prices may indeed increase 3% in prices and sellers out the amount of improvement. For this reason, some contracts are compiled without the final price quoted, just determine the house will be sold with a fair market value at the end of the option period.

There is a shade seller out there who will make a contract with an easy escape clause, such as the right to expel the tenant with only 3 days notice. In the best interests of buyers have their contract reviewed by a lawyer before entering into a binding agreement. Also, pay your rent on time and don’t give a seller of the opportunity to remove the agreement.