People often ask what the benefit to Rent-to-Own is for them. The true benefit of our Renter2Owner program is to get you into a home of your choice NOW, while you take the time needed to improve your credit and/or save up your down payment.
Following are questions that are often asked by potential Tenant-Buyers during the qualification process:
What is a Rent to Own Home?
A rent to own home is where you lease a home, but you also control the property by having the option to purchase it during your lease period. We cannot market the home for sale, since we are bound by an agreement to sell the home to you at a pre-determined price agreed on before you move in.
What is the Initial Option and how much do I need to put down?
The Initial Option is like a down payment to start the RENTER2OWNER program. It is required to demonstrate that you have something invested in the success of this program and that you have some financial footing to begin with.
We look for a minimum of 3% of the home’s buyout price. The larger your Initial Option payment, the better it is for you because it will lower the Option Payments you must make each month to accrue your minimum down payment amount.
What are the monthly Option Payments?
Over the RTO term, you must accumulate a minimum down payment amount, plus closing costs for your buyout. Your Initial Option will be the starting point for this amount, so the balance must be made up each month throughout the term. So if you need to accumulate $15,000 by the end of a 3-year term and you start with an Initial Option of $10,000, then your Option Payments will be $140 per month ($5,000 ÷ 36 months).
The monthly Option Payments are paid in addition to your regular rent payments.
How is the buyout price calculated?
The buyout price is calculated based on the current market value of the home today, the length of the RENTER2OWNER term and the average property appreciation rate in the market that the home is located in. If the house you want is worth at $300,000 and the average home in that market has been appreciating at 4% per year, then the buyout price will be calculated at that rate over the length of your RENTER2OWNER term. So if the term is 3 years, then the buyout price for this home will be $337,000.
How is rent calculated?
The rent charged will always be in line with fair market rent in the area the home is located in. A separate rental agreement is drawn up for the length of the RTO term, which outlines all the necessary details.
What happens if I can’t purchase the house at the end of the rental term?
The action plan we put together for you is designed to get you into a mortgage qualification position by the end of your RTO term. If you stick to the plan, you will have a greater chance of success. Having said that, sometimes things happen during a RTO term that are beyond your control.
Since RENTER2OWNER deals with private investors and not traditional lenders (banks or mortgage lenders) there is flexibility to address issues on a case-by-case basis and do not have a standard clause that applies to every situation.
In worst case scenarios, Tenant-Buyer loses his option deposit and rent credit if they wish not to close.
Who is in charge of the home’s maintenance and repairs?
As a homeowner would, you are responsible for all maintenance of the home and property for the duration of the RENTER2OWNER term. You are responsible for any minor repairs however, larger issues that exceed $1,000 such as foundation problems, heating;,roof, etc. will be the home owners’ responsibility.
Who pays for the home inspection?
You are responsible for the cost of the home inspection, to ensure we are only putting offers on homes you are serious about. The home inspection is mandatory to ensure we are securing a quality home for you; which is important since the house will ultimately be yours when the program is finished. Therefore, a home inspection should not be required again at the end of the term.
Who pays for the property taxes and insurance?
The home owner is responsible for the property taxes and insurance. The amount of the taxes and property insurance are included in the rent price. During the RTO term you must have renters/content insurance.
Can I have my lawyer look at the paperwork?
Absolutely, we prefer you have legal representation look over the paper work however, if you choose not to, that is fine as well.
Can I renovate my home?
Yes. As long as the home owner is contacted prior to any major changes and the work is performed by a qualified trades person. Apart from that we have no problem with it as you are improving the value of your home.
