Buying A Home
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Our tech team has launched updates to The Nest today. As a result of these updates, members of the Nest Community will need to change their password in order to continue participating in the community. In addition, The Nest community member's avatars will be replaced with generic default avatars. If you wish to revert to your original avatar, you will need to re-upload it via The Nest.
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Thank you.
Note: This only affects The Nest's community members and will not affect members on The Bump or The Knot.
Lease to own?
How does this typically work? We found a great house to rent and are wondering if we should consider this option, but I'm pretty clueless about it.
Re: Lease to own?
We considered it before we decided to purchase instead. Basically, you sign a contract stating that you will pay x amount to the Owner. A portion of that amount goes into an escrow account and would be put towards your downpayment. I think a term ending period is also written into the contract. Meaning, our owner said that we would do the leasing for a year and upon that time seek financing to purchase.
We didn't go for it b/c the amount to lease purchase was so high, it was almost double our current rent and would have been more than a mortgage. Also, we didn't know if our situation would have changed so drastically in a year that it would have been worth doing. So I told DH to let's see if we can buy the house outright and so far things have been falling into place for us.
I wouldn't say our situation was common but maybe lease/purchase would work for you.
ETA: This is how it was explained to us...if I'm wrong I wouldn't mind if someone would give you more accurate info.
Okay, I do't know anything about the property you are looking at,
BUT the lease-to-owns I've seen in my area are crazy bad deals, and I suspect some are scams. Some things I've noticed:
only a tiny portion of your monthly payment goes to the eventual possible dp, like under 20%. So if you are paying $1k a month in rent, only $150 or so is going to your eventual 'equity' - in a year you pay $12k, $150x12 of that ($1800) goes to your dp fund, the rest is rent, it's not like all $12k went towards the dp which would be much better.
then, you have to pay the value of the house when you moved in. Well, around here prices are stable but still dropping slightly. So if your rental was worth $200k (and that is the real value, not just what the seller wants to place it at, another scam) and prices have gone down just 3%, you will now have to pay $200k for a home worth $194k one year later. So you gain the $1800 but lose the $6k, which is a net loss.
I'm not saying lease to own are all scams, but make sure you understand all the numbers before you consider it.
That helps a lot. I was given warnings about doing lease/purchases with strangers. Ours was a family member so I felt it was different but again, we're coming out better not going that route. I think what someone suggested to me (they were a former REA) is that you rent by just paying the current mortgage and on your own put money aside for a dp. You might come out better in the end.