Rent to Own
Frequently Asked Q&A
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Rent to Own & Work for Equity Program
Frequently Asked Question and Answers
In some cases, it’s tough for buyers to find financing. Things that hold a buyer back are getting financed right away are; poor or ugly credit, low or no down payment, no credit at all, income too low to support a comfortable Debt to income ratio for a bank and not enough time on a job or self-employed. With the tougher regulations put on banks, it has made it hard for sellers to find a qualified buyer.
We here at Bull Fish Investments buy these properties in many ways, allowing us the opportunity to offer these properties for rent-to-own.
Also, known as lease-option, lease-with-the-option-to-buy, or rent with an option to buy. Rent-to-own is simply a combination of a one year lease (which gives you the right to use and occupy the property in a lawful manner) and an option-to-purchase agreement (which gives you the first right of to buy the property at a set price). Unlike a one your lease, Tenant buyers will pay a slightly higher rent and usually requires a option-to-purchase down payment of at least 5% of the purchase price plus the first months’ rent. Rent-to-Own agreements, if prepared properly, is a great way of enabling people to begin working towards home ownership who are having trouble lining up bank financing or coming up with a larger down payment.
The down payments are based on two main factors, your credit worthiness, the length of time needed for you to qualify for conventional financing and is there any repairs needed in the home. If you’re not credit worthy now because of having Bad Credit, Slow Credit, or No Credit that’s fine, we work with people in those situations all the time. Once we learn your path to home ownership, we’ll know how long it will take you to get qualified for conventional financing. So the longer it takes for you to get qualified for financing, you will need 5% or the purchase price to put down or more.
If your already credit worthy and based on your credit, you can get financed at any time and all the mortgage specialist needs is you to have more time in the same job or you just may want more time to raise a larger deposit, to get better rates. In these types of cases your deposit can be 5% of the purchase price or less.
If there is a large number of repairs needed to be completed to the home before you can move in and you get them completed. We will consider that as a huge commitment on your part and we’ll reduce your upfront down payment requirement.
You will need to speak with a mortgage specialist of your choice (we can refer you to a few we know if you’d like). Once you’ve spoken to the mortgage specialist and they’ve given the path you need to follow to get financed, you will now what is needed to qualify.
Some of our properties need some repairs and those properties fall under our Work for Equity Program. If the home you are considering needs any repairs, you must have the ability to complete those needed repairs such as painting, installing cabinets, minor plumbing, replacing rotten wood, etc. You must also pay rent during this process plus have the ability to correct any credit issues you have and have the income suitable to acquire some kind of permanent financing in the foreseeable future. This doesn’t mean your credit has to be good, but it does mean not everyone will get approved. Once you’re considered for a Rent to Own or Work for Equity home, you’ll need to/or have already spoken with a mortgage specialist and/or provide us with a current copy of your credit report so we’ll know if this is a problem before you’ve made your down payment. Once you’re approved for the Rent to Own or Work for Equity program, you’re well on your way to home ownership and well on your way to the American dream.
A list of repairs will be presented to you prior to any commitment from you. These will be the repairs needed for permanent funding. You may wish to do more than what is on this list, but the list must be completed first. You must fund the cost of the materials. You should have at least $500-$1,000 available to begin the process, in addition to the first month’s rent. The repair list will be divided into a maximum of four phases. Each inspection will be done at your request after each phase is completed.
The time for repairs will be agreed upon on a case-by-case basis depending on the amount of repairs needed and your personal situation. No repair schedule will exceed three months and most are done in considerably less time.
The purchase price will be set up front allowing you more than adequate consideration for your participation. You’ll receive a lot more equity in the home than what your labor would cost. The price will be well below the after-repair-value and all facts will be covered in detail and be in writing. No surprises!
Instead of charging late fees, we work on a credit back system. If you pay your rent by the first of every month but no later than the third of that month, you will gain a predetermined credit against the purchase price. If rent is not received by the end of the third day of each month, you will lose that months’ credit and will be in jeopardy of defaulting under the terms of the lease.
Example:
If you are renting to own a home with an asking price of $125,000 and you paid a up front down payment of $6000 and your monthly payment is $1250. If rent is due March 1st and you pay no later than March 3rd, $150 will be credited against the purchase price. If rent is paid March 4th or later, you lose that months’ credit and will be in jeopardy of defaulting under the terms of the lease.
No… In most cases, lending institutions will only allow any credits from base rent (market rent) to be subtracted from the purchase price but not used as additional option deposit.
Yes… We ask that you pay all rent payments by check each month and any payment (by separate check and marked as additional deposit) over and above base rent will be considered as additional option deposit.
- Contracts are written as a One Year Lease/Option with the right to renew for 1 or 2 years, (Every Property is different) giving you time to;
- fix credit issues,
- Raise a larger of down payment
- Gives you a chance to check out the house and neighborhood with being locked into a mortgage.
- If the market value of the property increase during the term of the lease and your price is locked in. That equity is yours as long as you exercise your option to purchase.
- If you fall behind on rent and/or break any of the terms of the lease. You may, at sellers’ discretion, be evicted and you can lose all up-front option deposit and any additional option deposits and credits given.
- If you are not financeable by the end of the lease term or by the end of any extension given. Seller may deny any further extension and you can lose all up-front option deposit and any additional option deposits and credits given. You must keep your eyes on the prize and continue working on credit and debt to income ratios.
- If the market value of the property decreases during the term of the lease and your price is locked in, the house may not appraise for the contract price. If this is the case, if the seller is welling, you may;
- renegotiate for a better price.
- ask for an additional extension to hopefully ride out down market.
- Make up the different between the asking price and appraisal value then exercise your option to purchase as agreed.
- find its more cost effective to walk away if seller is not will work with you.
- Affordability
- Remember you are now on your way to home ownership which means rent is not your only expense. You will be responsible for all the utility, heat and all routine maintenance costs.
- If you don’t fix your credit problems, your interest rate when you get financed may be higher than expected raising your payment.
- If you don’t raise enough down payment, you may pay private mortgage insurance which is an add expense that only benefits the bank.
Possession will be delivered immediately; however, if the house has been flagged by a utilities company or condemned. In these cases, the house must be repaired before it can be inspected by the city and released for occupancy. The repairs will be your responsibility. We’ll handle the inspection. You may not live in the home without prior consent from us and such consent will not be given until the repairs are completed or in some cases you may put up a deposit and live in the home while repaired if it doesn’t require a city inspection before occupancy.
Please make sure you’re clear on your occupancy rights. In a nutshell, the property must be code compliant in all cases and you will have either completed the repairs before occupying and/or made arrangements to pay a down payment so you can move in while repairing.
We have no homes you can move in with no money or commitment on your part.
You will be responsible for turning on all utilities in your name. In those cases, where the city must inspect first, we’ll handle the details with your assistance.
We’ll insure the dwelling until you become the owner. Our policy will not cover your contents but it will cover any renovations. You should insure your contents and in some cases, you may be required to buy some liability insurance.
We’ll pay the taxes until you purchase the home.
That’s a case-by-case answer. Some folks purchase right away, others take months. It depends on your needs and ability to get financing. Sometimes our buyers must live in the home for 6 – 12 months to show a pattern of prompt rent payments to the lender. Other times the loan process is started while the work is in progress. We’ll look at what your needs are and structure financing to suit. You’ll know all these answers up front.
Our objective is to sell the home, not rent it long term. You live up to your agreement and complete the repairs, pay your rent on time, and follow the path that your mortgage specialist set out for you, you will be approved for permanent financing. Again, all these details will be discussed up front and agreed upon in writing by both parties. Since we own the homes, we’re very flexible and willing to make it work. If there’s a big problem, we’ll know it up front. Of course, we can’t be responsible for your financial situation after you take possession of the house. A loss of income or future credit problems can prevent you from qualifying for a loan, but even then we’ll help you work it out as long as you pay the rent and keep your promises.
Go to our Homes Available for Rent to Own.
Once you’ve found a home you like, go to our Rent to Own Next Step Form and fill it out then call us immediately and let us know. Obviously, when we’re offering homes that folks can buy cheap, with very little money and built around a Rent to Own home, they don’t take long to sell. Call now to ensure availability, so give me a call at 1-603-630-0476 to speak with me directly.