| We've been unpleasantly surprised by the number of | | | | since the end of World War II. |
| "Rent to Own" signs popping up this summer. Why? | | | | You don't even need thousands of dollars in cash to |
| Because it's mostly a marketing gimmick to lease | | | | cover closing costs and all the fees associated with |
| houses property owners can't sell. There's little benefit | | | | buying a house. "No-cost loans" allow you to roll all of |
| to the renter -- even a renter with bad credit or too | | | | that into the price of the loan. So if you were |
| much debt to qualify for a mortgage. These deals | | | | borrowing $100,000 to buy the house and your fees |
| rarely result in a purchase and you could actually lose | | | | were $3,000, your total loan would be $103,000. You |
| money. We're seeing more of these offers because | | | | don't have to have $3,000 in cash to complete the |
| houses aren't selling as quickly as they did the past | | | | purchase. You can also ask the seller to pay your |
| two years. There's a growing backlog of unsold | | | | closing costs. The longer a house has been on the |
| homes and prices aren't rising as quickly, either. Indeed, | | | | market, the more likely a homeowner will be willing to |
| in many cities prices peaked last summer and have | | | | do that to get it sold. Don't be shy about asking, |
| been stable or even falling a bit since then. | | | | especially in cities where sales have slowed the most. |
| That has put some owners -- particularly real estate | | | | This is as negotiable as the price of the home or any |
| investors who buy houses hoping to "flip" or quickly | | | | other terms. Despite that, there are still lots of reasons |
| resell them at a substantial profit in a bind. Since they | | | | you may not be able to buy a house right now. A |
| typically buy houses that need a lot of work and are | | | | recent bankruptcy, low credit score or too much debt |
| among the least attractive on the market, they are the | | | | might make it hard for you to qualify for a mortgage, |
| hardest to get rid of when sales slow down. So now | | | | at least not without paying exorbitant interest rates |
| they're trying to rent them. By offering to credit part of | | | | that make the monthly payments unaffordable. |
| each month's rent towards the purchase price of the | | | | "Rent to Own" deals are often pitched as a way to |
| home the key element of any "Rent to Own" deal -- | | | | help with that but they offer little assistance. They |
| they are trying to make it sound like you are getting | | | | often require you to pay an option deposit. It is |
| more for your money and taking a meaningful step | | | | non-refundable, but it is usually credited toward your |
| towards owning your own home. Regrettably, that's | | | | down payment. In addition, a dollar amount or a |
| rarely the case. | | | | percentage of your rent is set aside each month to go |
| Twenty years ago, when lenders demanded | | | | toward your down payment. If, when your option to |
| substantial down payments to qualify for a mortgage, | | | | buy comes up, you cannot or do not wish to purchase |
| "Rent to Own" made a little sense. Landlords would | | | | the home, you lose that money. It is not unheard of for |
| credit part of each month's rent towards the purchase | | | | real estate investors to use a purchase option to |
| of the house. The idea was to rent until you had | | | | justify higher rents and lock you into a purchase price |
| accumulated enough for the down payment -- usually | | | | that's higher than what comparable houses are selling |
| 10% of the purchase price or more. But who needs | | | | for. Unfortunately, some renters don't realize they can't |
| that now, when lenders routinely make home loans | | | | afford to buy until it comes time to exercise the option. |
| with little or nothing down? You can easily find | | | | You might have been comfortable paying $1,000 a |
| "down-payment-free" mortgages. Yes, you'll have to | | | | month in rent. But that $1,000 probably won't cover a |
| pay more for them half-a-percentage point or more. | | | | house payment plus insurance, property taxes and |
| You can always refinance later when you qualify for a | | | | maybe private mortgage insurance, which is required if |
| lower rate. | | | | you don't have 20% down. And then there's always |
| Government-backed loans, such as those insured by | | | | maintenance, which was likely the responsibility of the |
| the Federal Housing Administration, or FHA, have low | | | | owner, but comes down to you. So if you've got to |
| down payment programs as little as 3% -- and you | | | | rent, find the best price on the best home you |
| can borrow the down payment from friends or family | | | | can.Usually you can find a home with all the basics for |
| or obtain funds from public or private agencies. The | | | | almost always less than what you're currently paying |
| FHA was created to help first-time buyers, those with | | | | in rent. Don't let "Rent to Buy" enter into the decision. |
| modest incomes or people who would be unable to | | | | My goal is to educate the consumer on the largest |
| obtain conventional mortgage financing. The FHA is | | | | purchase they'll ever make! |
| more lenient when it comes to credit scores and | | | | "Allow Me To Be Your New Friend in The Mortgage |
| blotches on your credit history -- even bankruptcy. And | | | | Business" |
| the Department of Veterans Affairs, or VA, has been | | | | Feel free to submit all your mortgage related questions |
| offering no-down loans to qualified service personnel | | | | and I promise to respond within 48 Hours. |