As mortgage laws become more stringent and people find it increasingly difficult to qualify for their own mortgages today, leasing is quickly becoming an option that many people turn to.
BUT what makes a rent-to-own program great for renter-buyers or rent-to-own?
Truth be told, the best and most successful rent-to-own tenant-buyer is someone who already has a landlord mindset.
Young, old, single, married, families, divorced, self-employed or newcomers to the country. No matter what category you fall into, leasing may be a good option for you if you have been unable to obtain a traditional mortgage as a result of credit problems or lack of down payment. Leasing will give you the opportunity to choose your own home, the time to repair your credit, and the discipline to rack up your down payment as you build home equity, BUT it’s not a piece of cake for everyone. Although leasing can work for many types of situations, here are the mindsets of people who will be successful in leasing:
1. Eager and motivated to own because they understand that real estate is one of the best ways to start building your wealth.
2. Determined to repair any credit problems they face
3. Understand the benefits of stock appreciation
4. You take pride in maintaining and caring for your home
5. You are tired of spending your hard-earned money on rent, which only makes the landlord richer.
Even with the right mindset (which is half the battle), you still need to align with the right rent-to-own program or model. There are many options available (tenant first, where you select your home, ownership first, where you select a home from a list of available homes, no money down, etc.), so the best advice is to always do your due diligence with people. or company that offers rent-to-own and rent-to-own programs available. This is the key. A great rent-to-own program can be defined by many things and is likely to be subjective, but to me these are some of the things to look for:
1. A program where you receive support in your credit repair efforts. Two or more heads are always better than one. Even having someone you trust to share ideas or answer questions sometimes makes a difference.
2. A program where enough of the monthly payment goes toward your down payment or option credit so that you can increase your down payment to 5% or even better, 10%.
3. You must select your own home. Although it’s a “home” for your family, it should fit your needs and budget…and you should LOVE it. How likely are you to be successful if you don’t enjoy being there or being in the neighborhood?
4. Transparency. Are all numbers provided to you in advance? Avoid surprises later by making sure you agree on the numbers before committing to the property.
5. Feeling of ownership. Don’t go into a program where you’re going to “own.” One of the best things about renting to own is that you have the freedom to update the property and make it your own. It should not be micro-managed by owning a home.