If you dream of owning your own home, but unable to qualify for a mortgage, Tenant First Rent to Own may be the solution you’ve been looking for. The Tenant First Rent to Own program has helped countless individuals, couples and families purchase a home of their choice despite their credit situation. But, what is it, how does it work and who can qualify?
In today’s strict mortgage climate, people with poor to fair credit scores are not being approved and consequently not able to own their own home. I believe bad credit can happen to good people and shouldn’t keep them from becoming homeowners. It is a dream shared by so many, and one that should be attainable to anyone with financial sense.
What is it?
Rent to Own is where an investor purchases a property and rents it to a tenant for a lease term of 1-3 years at the end of which the tenant buys the home from the investor at a pre-determined sale price. Tenants who enroll in this type of program want to be homeowners NOW but cannot qualify for traditional bank financing due to poor or un-established credit. As opposed to Rent to Own in the traditional sense where the home has already been purchased, Tenant First Rent to Own is where the investor assigns a qualified real estate agent to work with the approved tenant buyer to shop for the house of their choice.
How does it work?
STEP #1 – People interested in the program fill out an application to determine whether they qualify or not.
STEP #2 – The Investor reviews the application and if the numbers make sense, you will be approved.
STEP #3 – A qualified Real Estate agent is assigned and you go shopping for the house of your choice. The investor only buys a home that is on the market after you have personally chosen it. Your credit history won’t stop you from getting your home immediately.
STEP #4 – Once you find the perfect home, the Investor buys it. You are required to leave a 3 to 5% deposit that will be reimbursed and the end of the lease term.
STEP #5 – You lease it from the Investor for a period of 1, 2 or 3 years.
STEP #6 – During the lease term you work with a credit specialist to fix your credit with the assistance of the Investor.
STEP #7 – Every month a % of your lease payment is saved as lease credits that will be given back to you when you are ready to make your purchase.
STEP #8 – At the end of the lease term you buy the home using your lease credits and initial deposit.
Who can qualify?
Bad credit, so-so credit, no credit…NO DIFFERENCE. Once you are approved for Rent to Own, the investor will help you repair your credit so that you’ll be able to purchase your home with traditional financing at the end of the lease term. If you make a combined income of $60,000, have a 3%- 5% down payment, and can afford a reasonable monthly lease payment, you have a good chance of qualifying for a Tenant First Rent To Own program. Even if you do not make $60,000 combined income, some Rent to Own programs may still be an option. All you need is a small down payment of 3%-5% of the purchase price of your home.
With most Rent to Own programs, there’s NO obligation to Buy. The Rent to Own agreement is to sell you the home you desire at the end of the lease term. However, if your circumstances change, you are not bound to any purchase contract and are free to move on. However, be aware with most programs, the initial 3 to 5% deposit is non-refundable and neither are your lease credits. It is in the best interest of the tenant buyer to purchase the home at the end of the term.