Don't Let Rent To Buy Enter You Decision

First time home buyers you may have seen "Rent to Own" signs popping up everywhere. You should read “Beware” instead. “Rent to own” has never been really a ticket to ownership. But it is mostly a marketing technique to lease houses property owners can't sell. In fact there is little benefit to the renter, even for a renter who bad credit or too much, debt to qualify for a mortgage. These deals almost never end up with a purchase and you might actually lose money. Currently there is a growing list of unsold homes and prices aren't rising as quickly at the same time. The situation has pushed some owners, and above all speculative real estate investors, to rent these houses.

Basically in a "Rent to Own" deal you are supposed to pay a credit part of each month's rent towards the purchase price of the home. The idea is to rent until you had accumulated enough for the down payment, which is usually 10% of the purchase price or more. But lenders now make home loans with little or no down payment. "Rent to Own" deals require you to pay an option deposit. It is non-refundable, but it is usually credited toward your down payment. If, when your option to buy comes up, you cannot or do not wish to purchase the home, you lose that money. Besides real estate investors use the purchase option to justify higher rents and lock you into a purchase price that is higher than what comparable houses are selling for on the market. Some renters don’t take into account that in addition to the high rent they will have to pay insurance, property taxes and maybe private mortgage insurance, which is required if you don't have 20% down. Unfortunately, some renters don't realize they cannot afford to buy until it comes time to exercise the option.