Q: What is the Rent-to-Own Process?
- Submit a Free Online Application or Property Showing Request via our website
- Visit the home or homes you are interested in to decide whether or not it is for YOU!
- Submit full application if haven’t already. Even if you haven’t found the right home for you yet, you can still get your application going so you’ll be ready to go when you do decide on a home.
- Submit a recent credit report with your 3 credit scores. Let us know if you need help pulling your credit.
- Need Credit Repair? We know it can be overwhelming to decide which company to go with that’s affordable and legitimate. We’ve done our research and refer our clients to Clean Slate Credit Repair. Their initial consult is FREE!
- Submit funds in escrow (full down payment and first full month’s rent will be due prior to move-in and can be submitted at any point during this process).
- Get Seller’s approval
- Sign contracts
- Get the keys and move in!
Q: What are the benefits to renting-to-own as opposed to just waiting until I qualify for a loan to purchase a home outright?
ANSWER: There are numerous benefits to renting-to-own:
- You can move in the house you want to buy NOW knowing that the money you’ve put down is going towards the purchase of the home.
- Typically when you get a bank approval for a loan, it comes with an expiration date. That puts a lot of pressure on you to find the right home in a short amount of time. With rent-to-own you can enjoy the home you want to buy NOW and take your time repairing your credit, building a down payment and/or shopping around for the right loan for you.
- Most home buyers don’t have the luxury of being able to shop around for the best loan. Since you’re already living in the home you want to buy, you can make the banks work for YOU in offering the best terms because they know you are shopping around.
Q: What is the qualification process to be accepted as a tenant/buyer?
ANSWER: The qualification process is quite simple…from your application we will verify rental history, employment/income and background/public records. Plus you’ll do a credit consult with our 3rd party specialist to make sure we’re setting you up with the right terms which will include a check to make sure the price points of the home are affordable so that you are set up to win with your upcoming home loan.
* HOT TIPS * to get your application processed quicker:
- Fax or email a copy of your paystubs and/or proof of all household income (this includes child support, disability and any other household income).
- Be sure to also submit a signed VOR (Verification of Rent) Release Form.
- Submit your credit report and scores (or have us pull it) as quickly as possible! It’s ok that you need to work on your credit! Our consult is FREE and will help determine a plan for you to ultimately purchase the home (Please note, if you need your credit pulled by us, there will be a nominal fee to cover the cost of the credit pull).
- Get whatever funds you have available into the Third Party Escrow Account. No one can do anything with those funds until YOU sign off on it. If you don’t get selected for the home or if you change your mind, you get your money back 100% right away.
Q: I have challenged credit. How good does one’s credit score have to be to qualify for your rent-to-own program?
ANSWER: It’s not so much the score that we look at…we’ve seen scores around 500 (even below) be restored to the mid-600′s in less than 9 months…even with folks who have bankruptcy and foreclosures on their records!Credit is totally repairable if one is committed to a solid plan of action. Restoring one’s credit doesn’t happen over night which is why renting-to-own is perfect for such a situation.
What we look at with your credit situation is: what needs to happen/be disputed/be paid off/etc to get the score higher and to a lendable level? Some repairs/corrections can happen pretty quickly. We’ve had clients restore their credit in a matter of 3 months! Other situations will take some time.
We have an EXCELLENT credit specialists we can refer you to if you’re not already working with someone. They do free consultations and can get started on your credit repair right away. Over 90% of our clients can repair their credit within 12 months or less! We get you connected to a Seller with an 18 month contract, so that’s plenty of time.
Some of our Sellers will require that you be enrolled actively in a credit repair program throughout the term of your rent-to-own agreement. We’ve done tons of research and refer our clients to the Nation’s top credit repair service: Clean Slate Credit Repair. They are consistently rated #1 because of their variety of services (like online access to view up-to-date progress on your credit repair), affordability and excellent reputation.
There are some clients who need more than 18 months to repair their credit…let’s say they had a bankruptcy last year and need to wait at least 2 years with a solid payment/new credit history before they are lendable again. No problem! We make sure we match them up with a home whose Seller is willing to extend or start off with a longer term. Again, the beauty of how flexible and customizable a rent-to-own transaction can be!
Q: How do I secure the property?
ANSWER: A property isn’t taken fully off the market until contracts are signed and all funds are in escrow. Very rarely is someone NOT approved because our rent-to-own program understands and is flexible with damaged credit and special situations. The greater challenge will be other applicants beating you to the punch!
Q: What contracts are signed to seal the deal?
ANSWER: Rent-to-Own is also referred to as a Lease-Option transaction. The contracts include a Standard Lease/Rental Agreement with an Exclusive Option to Purchase. You lock in the price and terms for 12 months, 18 months or 24 months, depending on the seller. Most of our terms are for a year and a half.
Q: What is the average down payment required?
ANSWER: Every Seller is different and every property is different. Typically somewhere between 3.5-7% of the purchase price is what the seller is seeking for a down payment (sometimes referred to as an “Option Fee”). We have found that the higher the down payment (especially if it’s MORE than the minimum), the more flexible our sellers will typically be on the terms. Plus it’s easier and quicker to get qualified for a loan as 100% of your down payment goes towards the purchase price when you buy your new home.
In order to be competitive with other applicants, we encourage applicants to save up at least $5,000 (plus first full month’s rent) at a MINIMUM for city properties and $7,500 (plus first full month’s rent) for county properties. Again, it’s not that the Seller won’t work with you for less. It just likely though that there’s another applicant who is at least offering those amounts.
Q: Can I use my 401k funds for my down payment?
ANSWER: Yes! Many clients have taken out loans from their 401k plans for their down payment. Some retirement funds will also allow you to take a distribution without penalty, too, because you’ll be able to demonstrate that these funds are going towards a home that you intend to purchase. Also, for applicants who have recently changed jobs or are about to change jobs, you can elect to take a full or partial cash out distribution rather than rolling over the funds to the new company. Whatever the situation, we definitely recommend consulting with your administrator first to find out all the eligibility and any other requirements that may be involved.
Q: What happens if my application is turned down?
ANSWER: First thing to clarify…”turned down” doesn’t necessarily mean that you are not approved for our program overall. To date, the only applicants who have not been approved for the program were those who were not honest on their application. Others have been “turned down” because the Seller had to choose between multiple APPROVED applicants because of course, only one family can get the home. In that situation where an applicant is not selected, they have the choice to get their escrow funds back immediately or the funds can remain in escrow until another home becomes available. When that happens, the application is already processed and nothing further is needed. You just give us the word and we’ll present your application to the new home’s Seller and typically they are delighted to have a qualified applicant ready to go!
Q: Once I submit an application, how long does it take to know if I’m approved?
ANSWER: In general, if there are no delays an application can be processed in as little as 48 hours and be ready to present to the Seller. The final decision does not lie with us and once the completed application is in the Seller’s hands we all await his/her decision (which usually doesn’t take long).
Please note that each application must be complete (all fields completed, last 2 pays stubs submitted, and VOR authorization form submitted), before processing begins. Complete applications are processed in the order received. Additional applications will continue to be accepted until the owner approves an applicant and the applicant has signed contracts and full funds tendered as agreed. If contracts are signed but only partial funds have been tendered, back-up applications are accepted but it is disclosed the property is under contract.
Processing can take longer if a complication arises such as difficulties contacting your current and/or past landlords. Also, a copy of applicant’s driver’s license or other federal issued ID will be required at contract signing and will become part of the completed application. All information submitted on the application is subject to verification. Applications will be declined and not presented to any Sellers if we discover any information submitted was falsified, purposefully incorrect, dishonest and/or misleading and the applicant will be charged a $25 application fee and any other associated processing fees as allowed by law.
Q: If I am rejected for some reason or change my mind before signing the official contracts, how long before the escrow funds would be released back to me if I’ve already made a deposit?
ANSWER: Escrow funds are immediately refundable to you upon written request. We simply fax a release document to the escrow company. If all the paperwork is in order, your escrow refund can typically be mailed out to you the same day you requested it. We always have people deposit cash, money order or certified check (no personal checks or checks drawn from a credit line) so that there are no holds on the funds. For example, if you deposited a local personal check and then wanted a refund one week later, you would most likely have to wait 1-2 weeks until verification was received that your original funds cleared. But since we require cash, money order or certified check, there typically is no delay.
Q: Will I receive a rent credit?
ANSWER: Chances are very good that the Seller will offer what is commonly referred to as a “rent credit”. Many times this will depend on your final down payment amount. Let’s say the Seller agrees that for every monthly payment made by the 1st of each month, he’ll reduce the purchase price by $150.00. That $150.00 is what people call a “rent credit” but technically it’s not a credit, just a reduction in purchase price. So let’s say you purchase the home during month 18 of your agreement and have made ALL of your payments on the 1st of each month. The Seller would then reduce the purchase price by $2,700 (18 x $150). So if the purchase price is $185,000 then it would be reduced to $182,300 and 100% of your initial down payment is now applied towards the LOWER purchase price!
Q: Is my down payment/option fee applied towards the purchase price?
ANSWER: Yes! 100% of the amount that is used for the down payment/option fee goes towards the house!!!This, in combination with your “rent credits” can greatly reduce your purchase price.
Q: When it comes to a move in date, do you recommend moving in on the 1st only?
ANSWER: No, not necessarily. You can move mid-month or any day that best suits you. You submit the first FULL month’s rent prior to move in, but your next monthly payment due will be a prorated amount for whatever days you actually occupied the property in that initial month.
Q: When should I start looking at rent-to-own homes?
ANSWER: Since our homes tend to go fast, we recommend to start looking at our homes when you’re move date is around 30-45 days out, no more than 60. The last thing we want to do is show you a home that you absolutely love and want, but someone who can move in sooner takes it off the market before you’re in a position to move. However, it is possible to have a Seller hold a property for you, but it would require your full down payment plus first full month’s rent, plus signing contracts at the very least. It’ll all depend on how much that ends up being and exactly how long you’d like the Seller to hold the property for you.
Q: Am I financially responsible for repairs during the rental period?
ANSWER: For the first 30 days anything and everything materially affecting the livability of the property is 100% on the Seller. After that, the home warranty in place typically covers everything else…you just pay the deductible (typically $50-$60 per claim). With a property that has been completely renovated (where everything is brand new) sometimes the Seller opts not to have a home warranty because everything is covered by the Manufacturer’s Warranty.
Q: Can I have the house inspected by someone before making a decision?
ANSWER: Absolutely. Keep in mind, all of our Sellers have to obtain a rental license and pass any required property inspections for that license or registration which may or may not include a lead inspection. But you are welcome to complete your own for your own information’s sake. Just let us know when you’d like to conduct the inspection and we’ll make sure the property is accessible.
Q: Is it okay to run my business out of the house?
ANSWER: Generally…yes, but it is a case by case basis. The businesses that get turned down typically are day care businesses due to the liability incurred for the property owner.
Q: I’ve never purchased a home before. When I’m ready with my loan to finally purchase the home, what will my closing costs be when it is time to purchase the property?
ANSWER: Most people don’t know all that’s involved in purchasing a home…lenders, appraisers, inspectors, surveyors, title researchers, and of course the attorney are required to get involved and of course have to be paid. Thankfully, most of them don’t need to be paid up front…they get paid at closing…hence “closing costs”. Closing is when the purchase is made official and title is transferred from the Seller to Buyer and You get the deed to your new home. For anyone purchasing a home in Maryland, whether through rent-to-own or not, a rough estimate of closing costs would be:
- 3% for transfer taxes based on the contract price (if this is your first time owning a home, the county/state gives you a credit off of these standard fees)
- + 1% of contract price for title work fees/attorney fees (if you use our recommended Title Company you’ll get our discounted rates because we do so much business with them)
- + Whatever your loan company adds to this to secure the loan. This can range from 0% to about 4%.
Therefore, expect to pay at least 4% of the contract price and then be prepared for any additional costs in getting the loan. We have no idea what the loan fees will be, as they are totally dependent upon your lender. However, it is possible to negotiate these fees down. Be sure to ask if the Seller has a closing company that will offer a discount on the transaction.
Please email us anytime if you have any additional questions! We look forward to finding you the perfect home!!!