As the lending market continues to tighten, more and more people are finding it difficult to qualify for a mortgage. This is especially true with the recent announcement that FHA was tightening their guidelines once again. Now anyone with a credit score less than 620 will have to put 10% down – if they can even get a lender to give them a loan.
If you are in this situation, you may be discouraged. After all, credit restoration may take you up to two years. (Three if you have had a recent foreclosure!) Luckily, there is an option if renting does not appeal to you.
Renting to own can be a great option for those who do not qualify for a mortgage You can rent to own while you get your credit repaired. Then, in two years you can buy the home! During this time, called the option period, the owner cannot sell the home to anyone else. This means that as long as you qualify for a mortgage by the end of the rental period, you don’t have to worry about losing your home!
If owning your home is important to you, then renting to own is a great choice. Because you are allowed to do as you please with the home, you can make any changes that you would like. Since you plan to buy it someday, you can start making things how you like them right away. Most contracts do not even require that you let the homeowner know!
Financially speaking, you can really win with a rent to own home. A portion of each payment you make will go towards the purchase price, so you begin building equity up right away. Also, as long as your contract specifies the purchase price up front, you will ultimately benefit from any appreciation that occurs during your rental period.