First-time homebuyers often have a hard time getting qualified for a mortgage. Whether they don’t have the down payment or their credit isn’t good enough, they are often left renting. Luckily, there are rent to own programs that these buyers can utilize. However, they are not as easy to find as you might think. Unfortunately, there are a lot of scams out there, which makes it hard to figure out which programs are okay and which are not.
We’ll help you learn how to avoid the scams and find the legitimate opportunities that await you.
Don’t Fall for a Scam
First, you need to know the signs of a rent to own scam. This can help you save a lot of money in the long run. If you rent a home only to find out a few years down the road that it’s not a legitimate opportunity, you could lose thousands of dollars. Here are the signs to watch out for:
- The deal sounds far-fetched – Homeowners/landlords don’t often sweeten the deal for you when you rent to own. They offer you the option to buy the home in a few years, but that is about it. If they offer what seems like ridiculous choices, such as no down payment or low rent prices, don’t fall for it. There is likely a reason they make it so far-fetched. Don’t get involved in it.
- The “owner” doesn’t know the property – The internet has opened up many opportunities for fraud. There are people that list properties as rent to own that don’t even own the home. Make sure you ask specific questions before you ever see the home. You’ll get a good idea if the person owns it or not just by the answers they provide.
- The contract is overwhelming – If you can’t understand the contract, don’t sign it. As it is, you should always have a lawyer review the contract before you sign it. But, if you can make heads or tails out of anything in it, don’t sign it. Chances are the contract isn’t legitimate.
- Unrealistic demands – Owners don’t usually charge fees for you to see the home or process your application. If this happens, walk away – there are other sellers out there that operate more legitimately.
Finding the Right Rent to Own Situation
So now that you know about the scams, how do you find the real opportunities?
The easiest way is to work with a realtor. Realtors have the inside information regarding who is willing to offer a rent to own opportunity. They may know of sellers that already bought another home and can handle both mortgages. Maybe they know of a seller that owns their home free and clear and can afford to offer the opportunity to rent first. Use the realtor’s resources to your advantage.
Aside from a realtor, you can also ask the seller yourself. If you find yourself falling in love with a particular home, talk to the seller about their plans. Maybe they can afford to rent the home out to you for a few years. The thought may not have crossed their mind, but if you ask, you might get them thinking about it.
You can also join a site, like Housing List, which lists rent to own properties. The catch, however, is you have to pay a membership fee. You can search the properties in your area. But, if you find a home you like and wish to contact the owner, you’ll have to sign up for a membership. You do get a free 7-day trial membership. After that, though, you’ll have to pay monthly for the subscription until you cancel.
Finding a rent to own home is definitely a tougher task than finding a home to buy. You’ll have your work cut out for you regarding research and even finding an available home. Make sure, no matter what you do, that you read the contract carefully. Let a lawyer help you determine if it’s the right opportunity. Remember, if you walk away from the contract, you leave the “equity” or money you paid towards the home on the table. You don’t get a refund.
Using the rent to own opportunity can be a great way to save money for a down payment or buy yourself time to fix up your credit. Either way, you end up with a home to live in while you rent. Hopefully it turns into a long-term position where you buy the home that you love.