How to Protect Yourself from Rent‐to‐Own Scams
Speak with a financial advisor., Research the seller., Research the property., Be sure you can afford the rent before you sign the agreement., Triple-check your lease-option agreement., Start fixing your credit and accumulating savings Immediately...
Step-by-Step Guide
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Step 1: Speak with a financial advisor.
rent-to-own works because it gives you time to fix your credit and save for a down-payment.
A certified financial advisor can guide you in this.
Failing adequately to prepare for a successful loan application can cause you to lose your initial deposit and any rent credits you've earned toward the purchase
-- to say nothing of the home itself.
Completely understand the rent-to-own process and its potential dangers.
Speak with a loan officer to be sure you’ll be in good shape for securing a loan at the end of the lease.
Understand your financial situation, and be realistic. -
Step 2: Research the seller.
Perform a background check on the owner of the property.
Some sellers are not as honest as you'd like them to be.
Don't sign any purchase offer until you're comfortable with the seller.
Read any public records listing illegal activity, history of liens and foreclosures, or other complaints.
Ask the neighbors about the owner.
Look at his/her Facebook or Twitter accounts if you can. , Check public records to see that the property is not in foreclosure.
Hire a private title insurance firm to make sure the house title is clear.
You can learn more about the history of the home here. , Walking away from a contract, regardless of circumstances, means loss of money and reputation.
Complaining about the situation later won't help you. , Seek the advice of a real estate attorney to be sure your interests are protected by the agreement.
Do not sign the agreement until you've gone through its terms several times and made sure you're protected even in the worst-case scenario.
Review this sample Lease Option Agreement and look for loopholes in the actual agreement that might cause problems for you.
Address them before you sign. , Many rent-to-own agreements fall apart because buyers fail to qualify for a loan at the end of the lease.
Assuming you like the house and want to buy it, you will need to secure a mortgage when the time comes, so start clearing away whatever hurdles remain as soon as possible.
Tenant-buyers who do not secure loans face the loss of the property, their deposit and some or all accumulated rent credits. , It's smart to use the escrow agent for storing your funds. , Your contract may be voided by late payments.
Stay current with all your bills.
Keep your credit looking good so that you'll qualify for a mortgage. ,, Clear all possible home-buying hurdles before the lease comes to an end.
Be sure you are financially stable and committed to buying a home before you even start the process. -
Step 3: Research the property.
-
Step 4: Be sure you can afford the rent before you sign the agreement.
-
Step 5: Triple-check your lease-option agreement.
-
Step 6: Start fixing your credit and accumulating savings Immediately.
-
Step 7: Secure your deposit and rent credit in escrow.
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Step 8: Pay the rent on time.
-
Step 9: Make improvements to the property only after you've decided for sure that you want to buy it and will qualify for a loan.
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Step 10: Be cautious about all of this.
Detailed Guide
rent-to-own works because it gives you time to fix your credit and save for a down-payment.
A certified financial advisor can guide you in this.
Failing adequately to prepare for a successful loan application can cause you to lose your initial deposit and any rent credits you've earned toward the purchase
-- to say nothing of the home itself.
Completely understand the rent-to-own process and its potential dangers.
Speak with a loan officer to be sure you’ll be in good shape for securing a loan at the end of the lease.
Understand your financial situation, and be realistic.
Perform a background check on the owner of the property.
Some sellers are not as honest as you'd like them to be.
Don't sign any purchase offer until you're comfortable with the seller.
Read any public records listing illegal activity, history of liens and foreclosures, or other complaints.
Ask the neighbors about the owner.
Look at his/her Facebook or Twitter accounts if you can. , Check public records to see that the property is not in foreclosure.
Hire a private title insurance firm to make sure the house title is clear.
You can learn more about the history of the home here. , Walking away from a contract, regardless of circumstances, means loss of money and reputation.
Complaining about the situation later won't help you. , Seek the advice of a real estate attorney to be sure your interests are protected by the agreement.
Do not sign the agreement until you've gone through its terms several times and made sure you're protected even in the worst-case scenario.
Review this sample Lease Option Agreement and look for loopholes in the actual agreement that might cause problems for you.
Address them before you sign. , Many rent-to-own agreements fall apart because buyers fail to qualify for a loan at the end of the lease.
Assuming you like the house and want to buy it, you will need to secure a mortgage when the time comes, so start clearing away whatever hurdles remain as soon as possible.
Tenant-buyers who do not secure loans face the loss of the property, their deposit and some or all accumulated rent credits. , It's smart to use the escrow agent for storing your funds. , Your contract may be voided by late payments.
Stay current with all your bills.
Keep your credit looking good so that you'll qualify for a mortgage. ,, Clear all possible home-buying hurdles before the lease comes to an end.
Be sure you are financially stable and committed to buying a home before you even start the process.
About the Author
Angela Hamilton
Writer and educator with a focus on practical lifestyle knowledge.
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