Rent to Own

[Shuganon]

Anyone had experiance with rent to own? Supposidly, you can rent for three years and apply a portion of the rent to the down payment.

I live in Michigan. Chapter 7 discharge 6/10/10. Both first and second mortgages under water. Did not reaffirm. Stopped paying 2nd mortgage 6/1/10.

From my perspective, I am considering:

Making one more first mortgage payment. I will then be 60 days delinquent on the 2nd mortgage. Contact the bank resolution department and offer reaffirmation on first mortgage, if they drop the second. If they cant come up with some sort of plan that fits, I will stop paying the first. That should give me about 9 mos to save up for rent to own program before I am forced to move. Just doesnt make sense to stay here any longer, especially since I am not obligated any longer to pay.

Do you think not paying will jeopardise my ability to find a rent to own property, or does that three years put me in a position to get a new mortgage? Part of the problem is most of these rent to own properties are forclosures and many owned by fannie ar freddie (same as my current mortgage).

[Amy26]

Well I'm not 100% sure about the answers to your questions... however, I am pretty sure that you cannot offer to reaffirm a mortgage after you're discharged. It is a legal bankruptcy document that has to go through the courts. Your BK is done and over; technically the loan does not exist anymore because it was discharged. I have heard a few stories about people managing to refinance a discharged mortgage but that is few and far between. You might be able to get them to do some kind of modification and settlement on the second... its hard to say cause the banks are so crazy right now. Usually they are more willing to work with you the longer deliquent you are. So, you might not get any play from them only being a few months on your second.

I really don't know much about your chances of renting to own... I know the 2-3 year window to buy something again doesn't start until your discharged home is actually foreclosed on by the bank. When I lived in a property that offered the rent to own many years ago the "owning" part never even came into play unless I started looking for a home that they offered and then half of the rent that I had been paying would be allocated toward a down payment. But I'm pretty sure it was just like shopping for a regular mortgage and all the restrictions and credit requirements were there.

[frogger]

Rent to own. Landlords love this because 99% of the time, the tenants can not afford to pay for the place, and therefore loose the large deposit/down payment that they pay in.

And you've got to ask yourself? What kind of financial condition is the landlord in?

He/She may be as broke as you are.

[Shuganon]

Rent to own. Landlords love this because 99% of the time, the tenants can not afford to pay for the place, and therefore loose the large deposit/down payment that they pay in.

And you've got to ask yourself? What kind of financial condition is the landlord in?

He/She may be as broke as you are.

Thanks - Never entered my mind about the landlords position. Then again, most of these rent to own houses are bank owned from foreclosure.

[Shuganon]

Well I'm not 100% sure about the answers to your questions... however, I am pretty sure that you cannot offer to reaffirm a mortgage after you're discharged. It is a legal bankruptcy document that has to go through the courts. Your BK is done and over; technically the loan does not exist anymore because it was discharged. I have heard a few stories about people managing to refinance a discharged mortgage but that is few and far between. You might be able to get them to do some kind of modification and settlement on the second... its hard to say cause the banks are so crazy right now. Usually they are more willing to work with you the longer deliquent you are. So, you might not get any play from them only being a few months on your second.

Reaffirm was the wrong word. What I meant was some sort of modification where I am on the hook again for the first.

I really don't know much about your chances of renting to own... I know the 2-3 year window to buy something again doesn't start until your discharged home is actually foreclosed on by the bank. When I lived in a property that offered the rent to own many years ago the "owning" part never even came into play unless I started looking for a home that they offered and then half of the rent that I had been paying would be allocated toward a down payment. But I'm pretty sure it was just like shopping for a regular mortgage and all the restrictions and credit requirements were there.

I will have to research this further. Considering the three year rental period, that should just about exhaust my waiting period after FC.

[SMinGA]

We did this years ago-and it worked out well for us.

Moved into a house under a lease purchase agreement 10/02 w/ $1000 down. Intended mortgage to be in my name only, as hubby had an old judgment against him from cosigning a car for someone who ultimately stopped paying. I was working a 2nd job to have enough income to qualify, and needed more time on the 2nd job for that income to be able to count + needed to get scores up.

Long story, but the short version is all H*LL broke lose and one disaster led to another. (I was in a car accident 1/03 then 3 weeks in the hospital and months of not being able to work or only being able to work a few hours a day.) Financially things got really bad before they got better and so we were not able to get the mortgage when originally intended. Our seller however was wonderful and worked with us.

Filed Ch. 7 in 9/05 (should have done it sooner, I know) and closed on the mortgage 12/06. Seller kept the original agreement sell price even though it took us 4+ years to finalize the mortgage and the original plan had been to go no more than 1-1 1/2 years. And he still gave us the lease credit of $225/mo. Keep in mind, our agreement had long expired and he treated the same as if it had not. Plus since it was a lease purchase, the mortgage was treated as a refi rather than a new purchase. Meaning they used the appraisal value (instead of the sell price) and we went in w/ 20% equity so no private mortgage insurance.

It worked for us - but only because the seller was so great.

[SMinGA]

I do understand its a 3 yr wait after a FC to get a new mortgage. One tricky part of lease purchase might be finding a seller willing to allow you to lease for that long before closing the purchase part of the deal. Might need to do a regular rental for 1-2 years to get thru part of your waiting period. Which is not altogether a bad thing - as the lease/purchase arrangement will probably have you (not the seller) responsible for maintenance, repairs & such just the same as if you already owned it.

Also, if you ultimately go a lease purchase arrangement - make sure its a lease with option to purchase. Not something where you could owe damages if you are not able/willing to complete the purchase. And perhaps speak with a lender/loan officer ahead of time, just for some tips on how lease purchase agreements work and what is needed. (We had to have a notarized copy of the original agreement. If it had not been notarized to begin with, that would have been a problem...)

[SMinGA]

ps-

The only way you can assume financial responsibility for the discharged loan is to refinance it with a new loan. Even if you work out a modification w/ the lender - it is still discharged. The mod just changes your rate, payment amount. Does not replace the original loan with a new loan.

That is good news for you though...

[Rick9972]

I have been on both the renter and the owner side of "rent to own". Read the contract very carefully! Our time as the renter worked out very well and we bought the house. Same as the other person said, counts as a refinance and was able to miss the PMI train.

I then rented that house out with 3 rent to own contracts over 2 years. Financially it worked but was a major headache trying to find someone to actually pay. Alot of Rent to own "systems" are designed for you to fail and lose your deposit, so once again read the contract carefully.

Important!!!! Find out what happens if you payment is one day late. A person I know wrote in his contract that a late payment, voided the right to purchase the property. He would laugh about how a couple would be one day late during the first six months and pay perfectly for the rest of the 3 years and when they tried to purchase he would evict them. (Keeping the large deposit and credit they had accumlated throught their payments, plus sending them a bill for cleaning and repairs.)

It can work very well and be a great deal for the renter and seller. Do your homework first. Hire someone to inspect the home also.

[geye]

And where do you find those Michigan bank-owned rent-to-own homes?

[Shuganon]

Many different sites for Michigan properties - Just google

[geye]

That wasn't helpful to me. Sorry, maybe I'm dense, but all I find are run-of-the-mill leases. Could you provide some links, please?

[liverichly]

The portion of the rent that will be allowed to be applied as a "rent credit" towards the mortgage transaction is the lessor of:

1. The credit specified in the lease-to-own contract
2. The overage between the "market rent" (determined by a "rent survey" done by the appraiser) and the rent being charged.

So in the situation where the monthly lease is $1,200, the contract specifies $200/mo will be credited towards the purchase, but the rent survey determines the market rent to be $1,050 - then only $150/mo will be allowed to be credited towards the purchase.