In this blog, we often talk about the benefits of renting-to-own a home. However, it’s important to discuss all aspects of rent-to-own so consumers can weigh all the pros and cons before making a decision. Buying a home through a traditional mortgage or other means is a big decision. Be sure to take time to determine if this is right for your current financial situation, as well as your future.
People often turn to rent-to-own homes because they are unable to qualify for a traditional mortgage. Just because you don’t meet a bank’s qualifications, doesn’t mean homeownership isn’t the right move for you. You may be financially sound and perfectly capable of meeting all payment obligations but have made mistakes in the past that negatively affect your current day credit scores. If this is the case, renting-to-own a home may be a perfect opportunity to look into ways to repair your credit, without waiting years to own a home through other means.
However, sometimes people are turned down for loans because homeownership is not the best decision for them financially at this time. It’s important to look critically at your budget and determine if the benefits of homeownership outweigh the increased risk you’re taking on. We have put together advice on creating a budget for people in this exact situation. It may be that you just need to further analyze your income to debt ratio and make necessary adjustments to make homeownership a reality through a program like rent-to-own.
When deciding if this is the best decision for you, think about what your future goals are, what your current financial situation is, as well as future finances, and take a look at areas such as your credit which can impact loan approval ratings.
When is renting-to-own the right fit?
Generally speaking, rent-to-own homes are good options for the following types of situations:
- People who have poor credit history and are working to improve their credit.
- People who can afford the monthly payments on a rent-to-own home, but don’t qualify for a traditional mortgage.
- People who are unable to save the 20% required for a down payment on today’s homes.
- People who would rather use a rent-to-own option rather than interest + PMI for other loan types.
If your situation is unique and none of the above apply, a good plan of action would be to talk to a financial consultant about your current situation. They may be able to advise you on the appropriate steps to take to make your dream of homeownership a reality.
Before you make a final decision, either way, make sure to check the price of rent-to-own homes in your area, vs the cost of buying. This will give you the appropriate data to make a sound decision with.
We wish you the best of luck on your journey toward owning a new home!