Lease To OwnRenting or Leasing to own can help buyers with not so good credit qualify for homes that they wouldn’t be able to purchase otherwise. The way it works is that a tenant pays a rent that’s higher than the market and the excess amount of money goes toward a down payment. That’s called a lease option or a lease with an option to purchase. The tenant agrees to lease the home for a while and then buy the place for the price it’s listed in the contract. However, if the tenant decides not to buy the home, then the landlord or owner of the house gets to keep the extra rent he was paid and an upfront fee. If it’s the owner that breaks the contract by selling the home before the deal expires, then the tenant gets his money back. Sometimes lease options go well and sometimes they don’t. Here are some things to watch out for if you think you’re interested in this type of home purchase.
You’ll be paying more because you’ll have less negotiating power. You’re offering to rent the place until you can actually own it, you’re not buying it right away. Most home sellers are more interested in getting out of the mortgage and take the equity, but with a lease option they’re still stuck paying for the mortgage every month. An owner will also be waiting for the tenant to check his credit, they might not even qualify for a loan later on. Typically, owners aren’t interested in this scenario, unless they’re really having trouble with selling their place. Tenants also have to be careful with the value of the place. They should get it appraised before they get into a situation like this.
Another thing to watch out for in a lease option is your investment of course. You can lose it if your landlord is not making his regular mortgage payments. The bank can foreclose on it. Or the landlord can try to get another tenant to pay higher rent and maybe help them with mortgage payments. As a tenant you are not protected, because you don’t have a contract with the bank, just your landlord. The real estate market might change during the years that you’re renting. If it becomes a better market, the landlord might feel they can get a higher sales price, if the market gets worse, the tenant might feel that they’re paying too much.
You might also figure out later on that even with a better credit you can’t afford the house you’ve been renting. There are a lot more fees to pay to maintain a house when you own it. Utilities, repairs, property tax, landscaping, condo fees if you live in a condominium development and more things.
If you still think a lease option works for you and you’ll be looking to move in the West Palm Beach area, don’t forget to make your moving day easy and stress-free with All My Sons if West Palm Beach movers. We’re a professional local moving company with solid, reputable credentials so you have nothing to worry about.