If you are trying to purchase a home to, but you’re having a tough time securing an approval traditional lender; and do not have the required down payment for a private mortgage, an alternative is a Rent-to-Own Purchase. Below are the usual questions.
- Regarding the initial down payment required to begin a rent-to-own program, how is this amount determined?
A few factors can come into play, but required down payment is generally 5% of the purchase price plus applicable Fees and closing costs of 3%; for a total of 8%. On a $400,000 purchase, that is approximately $32,000.
- What are the typical fees associated with the rent-to-own process?
Expected costs consist of the following (Estimates):
- Home Inspection – $500.00
- Appraisal – $500.00
- Independent Legal Advice/Representation – $1500
- Can I use my own real estate agent in this process?
100%.
- Who is responsible for purchasing the property at the outset of the program?
An investor partner purchases the property on the client’s behalf. Prior to finalization of the purchase, a Lease Agreement and a Purchase and Sale Agreement are require to determine the terms of the lease and the agreed end purchase price to ensure all parties are on the same page.
- Who is responsible for the property maintenance for the term?
You, the tenant is responsible for all maintenance and utility bills, including water.
- What are the options if I am unable to complete the purchase at the end of the lease term?
If payments have been missed or credit management guidelines have not been followed, you risk 100% loss of the initial down payment and accumulated credits. However, in the occurrence of an unexpected life event, exceptions may apply.
- Are property taxes and insurance charges incorporated into the monthly payment?
Yes, property taxes and insurance are typically included within the monthly payment.
- Can I qualify with poor credit?
Yes. Programs are available that aims to assist with credit improvement.
- Is it possible to purchase a property in any chosen location?
Yes, but more marketable properties in urban centres and direct surrounding areas are preferred. The less marketable the property the more difficult it is to match an investor.
- How is the future purchase price of the home determined?
A fair yearly appreciation is applied each year to determine predicted future value. This is disclosed in advance prior to finalizing an agreement.
- Who makes the offer on the property?
The investor makes the offer as they are the one purchasing the property.
- What is the typical period for finalizing an application?
Allow for between 4 – 6 weeks for the finalization once an investor has committed.