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Is renting to own a good idea?

Is rent to own a good idea? My husband and I want to own a home, but we are currently reparing our credit and are considering renting to own. Are there pros and cons to this? Currently we don't have much for a down payment on a new home so we were thinking by doing a rent to own, it would give use time to get our credit scores up and have funds put aside for down payment. Is this a smart decision?
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January 02 2013 - Wesley Chapel
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Rent to own is
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December 19 2013
 I do have a Bank I work with that can do a 580-600 loan with as low as 3.5%-5% down, if you meet other requirements. Talk to someone who actually knows what they are talking about, and wants to help you out. Credit is tricky and every report is different talk to a professional, like me :)  I can give you a game plan to get into a home quickly. Check out [removed by moderator]

Randy Roberts
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January 18 2013
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Rent to own is a very very bad idea.

While the theoretical concept of rent with the option to buy may seem attractive, some of the realities are considerably less so.

Owners who will consider rent to own are very rare, so it will cut down your options for properties considerably.   I consider it much smarter to spend a year or two working on improving your credit and (if necessary) saving up a good down payment.   Yeah, it is tough to move but it even tougher to lose a lot of money attempting to buy.

Some features of rent to own:

1.  Down payment required - often substantial (say 10%) and is non-refundable if the potential buyer doesn't purchase.

2.  Monthly rental is above fair market rent, with the only amount going to purchase is the amount above the fair market rent.  This is also not refundable.

3.  If not qualified for financing at the agreed upon  time and price, then you lose everything. 

4.  The price is agreed upon at the beginning of the contract, and housing prices may still be decreasing.

5.  You still depend on the owner to pay their mortgage.   If they fail, you lose.

If you do get involved in this, please involve an attorney in the contract.

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January 02 2013
Lawry has given you all the reasons why it would be best to fix the credit and be able to get an FHA or USDA loan than to have to pay a high down payment, just to own a home right now.  Meet with a few mortage brokers and seek their advice as to the best and fastest way to repair  your credit.  Then you will be able to pay a lower down payment and purchase your home.
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January 02 2013
Lawrie said it well...

In addition, there are VERY few lease options available, so the selection of homes would be limited.

Eve
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January 02 2013
Sadly there are more cons than pros in rent to own.

1) you would need a large down payment.
2) you would agree on a sales price dependent on todays market not future market prices
3) you would pay more than market price in rent and only the overage would go towards owning.

I would suggest speaking to a few local creditors and see what you can do to clean up your credit, start saving for your down payment, after that is all done then look for a home.

Good luck
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January 02 2013
 
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