Whats the difference between buying a house and renting to own?

trboprelude12: Whats the difference between buying a house and renting to own?
What are the financial advantages of each, and why would i do one over the other?

Answers and Views:

Answer by Carrie W
1. Lease -Purchases work like this. At the time the lease is signed, the renter gives the landlord a significant amount of money as a security deposit. What this money really is an option to purchase at the end of the lease. Generally, the renter has 1 year to make payments on time and to build a good rental history in that property. Then toward the end of the lease, the renter, because he has established that he can make payments on time AND he is already established in the house, can refinance the landlord’s loan, in order to buy out the landlord’s ownership of the property. The security deposit then becomes the down payment. There are a few aspects to keep in mind. a) If the buyer/renter is even one day late to the landlord, generally, he looses the option to buy the property AND looses any deposit money. b) The landlord generally holds only a portion of the deposit as the down payment. In the contract, it will say how much. Also the landlord will contribute a portion of each months rent toward the down payment, generally. c) The customer has to really be very credit conscious during the rental period. This demonstrates to the lending institution that the buyers is becoming less of a risk. If the customer does not, he will not get his deposit back if he cannot secure financing.
try getting an fha loan.

Answer by bettys
IF YOU RENTING TO OWN YOU SHOULD HAVE PAPERS SHOWING THAT IT IS RENTING TO OWN, IF NOT I WOULD BUY A HOUSE THAT I HAD PAPERS SHOWING IT WOULD BE MINE WHEN ITS IS PAID FOR.

Answer by justwondering
Assuming that you are dealing with a decent and honest seller the advantages would be: A portion of you rent is accruing towards your down payment – you will also have to be putting money aside to add to that amount when you do purchase. You have locked in a selling price, and assuming the market is still climbing in your area this gives you the inflated growth of equity. You figure the house will be yours so you will maintain and improve it with paint and landscape etc. The down side would be: Your income could change from a lay off or sickness and any money you have paid in will be forfeited once you are late with a payment. The seller is charging you the going rate of rent PLUS extra to be put towards the down – this helps people who can not save money through self discipline – however, the seller may be banking on you not being able to save the additional cash needed to make the down and the deal will fall through. You MUST have everything in writing to protect all the parties involved. There are a ton of books on how to make money buy psudo selling houses this way. You could check out the sellers track record so see what kind of person they are. I have had a run in with a very shady little old lady – who really plays the “little old lady” thing to the hilt. By checking her name with our local tax records I find that she has 6 house she is selling this way. The new feature of our public records is the listing of the sales prices, so I know that she bought one house for $ 290,000. and now has it for lease/option for $ 450,000. Not a bad profit if she can get it. So know who you are dealing with.

Answer by D
I have owner financed Homes for other people and still do, But typically I will get them a loan whether it be FHA, Conventional, VA, Chattel, or whatever. In most cases the people who end up going with an owner finance, lease purchase or “rent to own” they do so because that is all they can do because of not being able to qualify for a regular mortgage due to credit, DTI (debt to Income), & or down payment. In a vast majority of these types of arrangements, the “buyer” usually ends up out of the house and with a bitterness toward the “seller”. The best thing is to focus on establishing good credit, good job time, good rental history, and good bank accounts. Most mortgage companies look at the most recent 2 year history on credit with no late pays or derogatory accounts, two year work history without any job gaps, two years good rental history. What they will require upfront will be 30 days most recent pay stubs, 2 months most recent bank statements and most recent 2 years W2’s. Therefore if you are serious about being a homeowner, (DIRTFT) Do It Right The First Time!!! Now as far as down payment, FHA requires 3% but there are several DPA (Down Payment Assistance) Programs that can be used to where the borrower can have 100% financing including rolling in all of your closing cost. Conventional and other loans require 5+% DP and the buyer will generally pay all of their own closing cost. Hope some of this helps…