Question

rent to own vs mortgage?

i am looking to buy a single family home (in colorado) around next year at this time. i was wondering if anyone could give me a heads up on the differences between rent to own and just going the old fashioned way with a mortgage/down payment. i really don't understand the concept of rent to own at all and actually...it seems more like a scam than anything else to me. any info/tips would be GREATLY appreciated. :)

7 years ago - 8 answers

Best Answer

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Rent to Own (RTO) is not really a scam, but it does have its negatives. By doing a RTO, you do not really own the property while you are in the renting period so you will not be gaining equity or utilizing any tax benifits from home ownership.

RTO can be good if you do not qualify for a mortgage and allows you to get in a house and rent for a certain period with the right to buy it. In that time period you will need to position yourself to qualify for a mortgage or you will lose out on any deposits towards buying the property.

You have about 1 year from the time you are wanting to make the move, so you should be able to position yourself to qualify for a mortgage in that time period.

There are still loan programs available with little or no down payment available and it is usually easier than you think to buy a home, especially when you have 1 year to prepare.

I found a site online that gives free homebuyers tips that will help prepare you for your journey:
www.first-time-homebuyers-loans.com...

I hope I answered you question well enough. Good luck,

Greg

Source(s):

7 years ago

Other Answers

check this article comparing home loan with rent

www.ebindiaonline.007ihost.com/inde...

by ebindiaonline - 7 years ago

It is better to buy a house because renting will decrease your chances of affording your own home later. To own a house all you have to do is put 10% down and then you will pay a morgage which actually usually isnt that expensive. I would say $450/month for a starter home. This will help you in the long run because you can get your house the way you want it make a profit and upgrade when you need something more. I hope this helps.

Rent to own they is a scam because they get more money from you in the long run because you rent before you buy.

by Amanda - 7 years ago

It depends if the Landlord/Homeowner has increased the sales price of his home before having you lock into this Rent to own contract. Basically you will sign a lease that will tell you what the sales rpice will be at the end of the term, minus the money you have paid in rent over that time period. That money should be put away in an escrow account and used as down payment money toward the purchase. It is a very good deal for folks who don't have a decent downpayment.

by Midnyte - 7 years ago

I bought my previous house this way. I leased the home from the builder at $1,600.00 per month and they deposited $1,200.00 of that amount into an escrow account which could only be used towards the down payment during the first year of my lease. At month five I had $6,000.00 towards the down payment and was easily financed for the balance of $149,000. I live there three years and sold that house for $295,000. I was the smartest thing I have ever done. I took that money and bought a $500,000 house and financed the balance. Five years later this house is worth $875,000. Since I only owe $325,000 on it I am riding a half million dollar equity. All this because of the lease to own agreement.

by yes_its_me - 7 years ago

if you can afford and qualify for a normal mortgage I would go that route. But some people cannot qualify for the loan right now, or cannot afford the full mortgage loan, so they make an agreement to rent the property for a set amount of time, with some of the rent being applied to the future mortgage and price of home, and the seller agress to sell it after so many months of renting at an agreed price

But please get an agent to help you with the contracts so you dont get cheated, and to make sure title is transfered to you at the right time in the future

if you go with a normal mortgage you should own the home within 30 to 45 days and you can move in immediately

by sensei ronald j.f. panlilio - 7 years ago

A lease option is a technique which involves gaining "control' of a property, but not ownership - just the right to possess a property now and purchase that property at some future date with terms you define today.

A "Subject To" is getting the deed to a property without getting a new mortgage. Instead, the seller signs over the deed to his or her home "subject to" the existing mortgage staying in place. The buyer in this case makes the mortgage payments on the old loan, but does not get a mortgage themselves to acquire this home.
Both of these techniques usually require little or no money down. There are many ways to go about it. It's best to sit down with a financial advisor or loan officer to go over your unique situation and what's your best interest. Good luck!!

Source(s)

by Kim F - 7 years ago

Check out this rent vs. buy calculator. www.mortgagesum.com/mortgagecalcula...

by matthewkk - 7 years ago