What to Seek and Where to Look for a Rent-to-Own- By: Karim El Sheikh
While the never-ending debate of renting verses owning drags on, another intriguing option has popped up in the arena of foreclosed housing. Sometimes, an individual may be interested in staying in a certain area for a long period of time, but may not be able or may not desire to commit to a mortgage immediately. In this situation, rent-to-own may be a good solution to this quandary.
Rent to own is just what it sounds – the agreement starts off as a renting situation and eventually evolves into homeownership. Many banks are offering this as an option to those who are looking to take advantage of the current dip in the housing market – while the fact that homes have been devalued across the country hasn’t necessarily been a good thing for those who own homes or those who are looking to sell them, it definitely is a mark in favor of those who are looking to buy – but there are several reasons why jumping straight into a mortgage may not be a good idea.
There are other advantages in choosing rent-to-own. Namely, it’s almost like taking the house for a test drive before buying. While renting in an area allows the renter to experience living in a particular community and get used to its quirks and attributes, the problem is that even if that person ends up wanting to buy in that same neighborhood, they’ll have to move to a different property. Renting to buy combines the best of renting with the best of buying – that is, you get the benefits of living with relative impermanence and leases can be broken if need be, but if both the house and neighborhood turn out to be a good fit the renter can simply buy the house.
Of course, there are some negatives attached with renting as opposed to outright buying the house. While you’re living in a rent-to-own situation, there is no mortgage, thus if you end up deciding to purchase the house, you’ll end up with a mortgage, and all the money you sunk into rent won’t necessarily count toward it. Obviously, there are different arrangements that can be made to this end, depending on the terms of your renting agreement, but it definitely won’t be as favorable if you had chosen to simply buy the property.
However, before dismissing a rent-to-own situation based on mortgages, remember that you’ll need to take your own financial situation into account before deciding against it. It might not be financially smart for you to buy a house at this point, depending on your credit rating and how much money a bank will be willing to give you for a mortgage. While the high amount of foreclosures is producing lower housing prices, they are also making banks hesitant to hand out large mortgages that might end up getting foreclosed on. Rent to own might be a good option for those of you who have found your dream house but simply aren’t able to get the mortgage to purchase it.
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Rent to own properties present excellent opportunities for future home buyers. Search rent to own homes and find a property today without the buying commitment.