Rent to Own for three years?? Questions...

[needingsomehelp]

We are surrendering our house in our Chapter 7 (we tried to save it, but didn't have luck). We will be discharged from the 7 at the end of July. (Originally filed 13 in January 2008, only to have our mortgage payments go up again after filing). We have found a house that is perfect for us, and they are willing to do a rent to own, with very affordable rental payment for three years, and a great purchasing price as well!
Here is my question, at the end of the three years, between our savings, and our rental credit, it will total up to about 20% down. If we rebuild our credit carefully and have a decent score, what are the chances that we should be able to get a mortgage?
Thanks for any and all help! I appreciate it!

[wayne-o]

There are no guarantees of course, but from what I understand most people are able to get a decent mortgage 2 years out thru FHA. If you can get your scores up and maintain your payments. Best of luck

[needingsomehelp]

Thanks so much Wayne-O!!!

[Minnymouth]

You shouldn't have any problem getting a mortgage 2 years out an and even better rate 3 years out.

You say it is a rent to own?? Is THAT in writing? Does it state that anything you have paid plus deposit will be considered downpayment at purchasing time....?? PROTECT YOURSELF - don't be mislead!!

Or do you have it on a "Land Contract"...... in writing? Then it would be refinance in 2-3 years at a good rate. If a Land Contract.. is it recorded??

When purchasing a home the way you are right now you really have to protect yourself and your financial interest in the property....

Buyer - BEWARE.............

[needingsomehelp]

Hi Minny,

Thank you for your reply! Yes we are having a contract drawn up, and they are crediting so much a month to the sale of the home, plus our deposits. After all is said and done, it is over 10% of the sale price. Our lawyer wants to take a look at everything before we sign to, so we are happy about that!
I totally agree about protecting ourselves, this appears to be a pretty legit case. We are supposed to sign this week, after our lawyer goes over everything!! =)

[Minnymouth]

Yes, be sure your lawyer looks at everything to protect yourself....

You don't want to be in a position where you pay out a lot of money towards this place and then maybe the owners divorce or die and they decide to sell it out from underneath you.....

Since my "land contract" was recorded when I went to finance in my name they considered it a "refinance" and I got a good interest rate, etc. By it being recorded that put the seller in the same postion as a mortgage company. The seller could not just "decide to sell his property" because he wanted too and me loose everything that I had invested. My land contract recorded was a legal and binding document (mortgage) thru the court.

Land contracts and rent to own documents can be very deceiving and the seller has lots of leway to do many things. Its easy for them to default on your contract and put you out if they so desire. And any and all repairs or improvements you make would be at your expense and lost monies to you if default. Basically you are renting the property until you have it refinanced thur your own bank or mortgage company. By having it recorded at the courthouse, it changes everything. It becomes legal and binding and the seller has to go thru the court and foreclosure to get you out if you default on the payments.

What ever you do, PROTECT YOUR INTEREST in the property. Ask your attorney about having it recorded at the courthouse.

[needingsomehelp]

Hi Minny-


Thank you so much for that info, it is very helpful! Although I had researched rent to own options and how they work, I hadn't heard of the Land Contract! That is great to know, and I will definitely bring that up to my lawyer, and to the "sellers"!

[tiredofdebt1]

how much do you have to put down for a deposit?

[spell]

Have your lawyer review it very carefully. As you say, by the end, you'll have 10% wrapped up in the home.
If the current owner is able to show even a small deviation you made from the contract, he can keep that 10% and bid you a fond farewell.
What worried me a bit was the "great rent and great price" comment. This doesn't describe most lease options.

[jerzey]

7 years of writing Loans
Not one of my borrowers went through with the Rent to own
they rented the owner would buy them out and sell for more, Or their credit got worse, Or the owner had a loop hole in the contract, Or the Landlord Kept the cash and walked from the home, OR.....

One R/e investor I dealt with said " I love lease options, because the renter takes care of the house like its theirs but they never buy it" he owned over 20 homes and all of them were set up on options
Sad to say he is right

If you went this route, YES have a Lawyer read the contract a small fee paid out is worth alot in this case
B: do research on the home owner look up conty records on him and the hom have a title company doa title search to see if there are liens on the home
C: look at the area is the area going to stay safe and sound will home vavles increase over 3 years
D: look at loan options NOW granted 3 years you credit and such will change but look at if like you will purchase today so you dont go into this thinking there will be a loan for you in 3 years
E: look at the mortgage market closely you mortgage most likely will be slightly higher then the rent
F.: see if the landlord will put on you title once you sign this way he cant just remove you from the home you would have interest in the home
G: talk to an appraiser about the home NOT a R/E agent it would be best to have the home appraised now as well
H:.........

[Minnymouth]

Jerzey,
Great advice....
Yes, look for "any kind of lien" against the property, most title searches will reveal this. Look for "mechanics" liens against building supplies, etc.

Make sure "everything" is in writing, signed sealed and recorded!! Either a "agreement" or "Land Contract".

Be care that there is not restrictions that says you "have to" buy, or refinance in 2 or 3 years (you may find that you can't yet) otherwise you default on the agreement (a way of a landlord getting it back and you loose your investments)....

And yes, an appraisal would be well worth the money.....

What ever you do, "protect your interest"....

If you have questions, be sure you ask your attorney before signing any paperwork....

[dunno]

Whew - lotta information going on here...

I had contemplated a lease/option in the coming months

perhaps a rental is really the way to go....

Altho, being short of cash, I'd contemplated offering my gorgeous LG brush steel 28 ft3 fridge and front loading washer dryer in lieu of cash deposit.

Maybe I can find someone who'll do that anyway?