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Rent to Own: How the RTO Process Works

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At Amansad Financial, we encounter a lot of individuals and couples who have sound credit and make more than enough money to afford a mortgage, even by the conservative metrics that the banks use. However, they sometimes still cannot get bank approval for a mortgage. Sometimes they have not been with their current employer long enough; sometimes they are new to Canada. Some are self-employed, and so the bank has too many issues with income verification. Others are selling their existing home and so have a debt-to-income ratio that is still too high to qualify for a traditional mortgage.

We also come across people have had credit issues in the past, and their scores are still too low for the banks to consider a mortgage, even though they have a decent down payment. Still, others have credit that has some significant issues at the present time but does not have the additional down payment that a private lender would require.

In all these cases, going with rent-to-own (RTO) can make a lot of sense, depending on your individual situation. This article provides an overview of how the process might work for you.

Step 1: Initial Review

After you finish your application and provide the supporting documents, the RTO underwriting department will go through your file to make sure that the monthly RTO payment is within the range you can afford and what can be offered. Once that happens, a plan will be put together to move you toward homeownership. The purpose of this first step is to identify the exact factors that are causing you from gaining bank approval at the present time.

Step 2: Program Offer Review

Once you have made it through Underwriting, you will be sent your individualized RTO Program offer. If it meets your approval, you will send back a signed copy along with any additional documentation that Underwriting may have requested.

Step 3: Funding Contracts

Next, you will be matched with an Investor Funding Partner, and Underwriting will put together the contracts, where all of the financing details will go, along with the terms and conditions of your RTO Purchase Program.

Step 4: Independent Legal Advice

It is a requirement that you visit a lawyer with your RTO contracts so that you can receive Independent Legal Advice (ILA). This is done so that you secure your rights as the future homeowner. Once your lawyer approves the paperwork, then you can sign the contracts and return them.

Step 5: Signing by Funding Partners

The property’s seller and the Investor Funding Partner will sign the real estate contracts. The Investor Funding Partner is the one actually purchasing the house for you, and your part of the deal is to make payments through the RTO program and eventually own the property.

Step 6: Invest Funding Partner Rent to Own Purchase & Closing

You move in after the Investor Funding Partner closes on the sale. Now you start working with Underwriting to improve your own mortgage profile so that you will be able to take over the property by qualifying for a mortgage when the RTO contract comes to an end.

Step 7: End of RTO and Your Purchase

When you have finished the RTO program, you will have what you need in terms of credit score so that you can find a mortgage lender who will fund your purchase of the home from the Investor Funding Partner.

Amansad Direct Lending Group looks to provide Common Sense Solutions for purchases, refinances, and other creative funding options. Amansad will always look to find you the right private mortgage when the banks can’t help, however we have business relationships with various Rent to Own Companies and Investor Funders that may be able to assist.

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Daniel K. Akowuah | Mortgage Professional / DLG Underwriter
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