Website design By BotEap.comCurious about rent-to-own, but have no money to pay? Wondering if a no-down-payment rent-to-own option might work for you?

Website design By BotEap.comIt is a very important and good question for you to do a little research on the subject. You will need to understand the challenges that will arise as a result of an initial rental with no money to buy. Hopefully this article will raise awareness of some of the questions to ask yourself to protect yourself if you are looking for a starting rental with no money to buy.

Website design By BotEap.comSimply put, an initial rental with no money to buy is one where you don’t have to put any money down to get into the program.

Website design By BotEap.comWhat are the implications?

Website design By BotEap.com1. More risk for the investor, so he will compensate his risks by charging him higher monthly rents (perhaps even higher than market rents). I’ve seen situations where rents for a no-down-to-purchase rental were as high as $ 2000-2500 when market rents in the same area were $ 1500 per month. This $ 2000-2500 amount doesn’t always take into account the money that is credited for the down payment, so be sure to ASK!

Website design By BotEap.com2. You will have to save a larger portion of your down payment before the rent-to-own program ends or you will risk not qualifying for a mortgage and lose the property as a result. Looking at this in terms of numbers, a median home price of $ 300,000 will require a 5% down payment (or $ 15,000). If you go into rent-to-own with initial ZERO, you will need to save up to $ 15,000 over an average term of 3 years (for example) to qualify for that mortgage at the end of the term. That means saving $ 5,000 a year. If your rent to own property allocates, say, $ 200 a month for your down payment, you would accumulate $ 7,200 over the three years. That means you would need to recover the balance, or $ 7,800 yourself. If you cannot do this, you will not qualify for your mortgage and will most likely be asked to vacate the home at the end of the rent-to-own term.

Website design By BotEap.com3. You will not accumulate any value in the property (basically, you are a tenant (paying more than market rents) in the hope that you can save enough down payment and purchase the property at the end of the rent-to-own program. Equity is the amount of money you have invested in the property or earned on the gain in value of the property. For example, if you deposit $ 10,000 in a property, you automatically have $ 10,000 in equity in that property. Initial money, you have zero equity in property.

Website design By BotEap.com4. In many cases (not all, but many), you will be left alone to improve your credit standing and save a minimum of 5% on your down payment. If you have not received any credit repair support and your credit has not been repaired enough to qualify for a 5% down payment, the lender or bank may ask you to give a 10%, 15% or 20% down payment. advance (which you probably won’t have since your goal was to save 5% on your down payment). Looking back at the median home price from the second point ($ 300,000), if you couldn’t improve your credit during the term of the rent-to-own program and you needed 10% to get the mortgage, you wouldn’t be obligated to come with a down payment of $ 30,000, not the $ 15,000 in the previous example. If $ 15,000 sounds like a daunting task, imagine $ 30,000 or even more if 15% or 20% is needed.

Website design By BotEap.comSo what does all of this mean to you?

Website design By BotEap.comDo your DUE DILIGENCE!

Website design By BotEap.comAsk questions and be VERY sure you know all the pitfalls you may encounter if you choose to go into a no-down payment rental. To get started, ask questions like:

Website design By BotEap.com1. How much is the monthly payment? (compare it to other rentals in the area)

Website design By BotEap.com2. How much of each monthly payment goes towards your down payment?

Website design By BotEap.com3. Do you offer credit support?

Website design By BotEap.com4. What happens at the end of the rent-to-own term if you can’t get a mortgage?

Website design By BotEap.comI’m not saying that a no-down rent-to-own can’t be successful. I’m just saying that the road to success is MUCH harder this way and requires a very different level of determination and discipline.