Just more than a decade ago, you would hardly ever hear the term lease to own in Portsmouth RI, since it was a market where you would be required to buy and build. However, since there are several properties for sale in subdivisions and villages that are being sold on the market today, it is a totally different ballgame. Homeowners are now considering lease-to-own agreements or contracts; even from people who usually would be turned down by banks or lenders for home loans.
A lease to own agreement or contract requires buyers to make monthly payments as rent to the homeowner. This setup usually goes on for two to six years when both parties agree to start the standard purchase. For those who are looking for lease to own homes, you will need to demonstrate a good credit history. If you have a good credit standing, you should consider using this option. It is important to look at a few pros and cons before taking a major step to buy a home. This information will also be beneficial for both parties.
Now, let’s say you have actually decided to lease a home in Portsmouth RI. Besides having the time to build up a down payment as well as maintain a good credit standing, renters have the advantage of trying out the house and the neighborhood. Not all the money you use to pay rent will go towards the down payment. Mortgage lenders are the people who make decisions as to how much of your rental payments will be credited towards the downpayment and closing costs.
For example, the property can be rented out by the owner at a standard rent price of $1750. However, on the negotiation part, you and the seller agree that you will pay $2,000 a month, with $250 being your homebuying credit. At the end of a three-year lease, you will have to have roughly 9,000 set aside as purchasing credit. This amount will be returned to you at the moment of settlement and you can use this money for your deposit, closing cost, or down payment. If this option is not offered at the negotiating table, consider this as a red flag.
At the end of the lease, if you decide not to buy the house, you will probably not get a refund for the extra payments that were made. That amount is usually only returned to you when you buy the property. Of course, this should be mentioned in the initial agreement. It is important to make sure to ask the homeowner about this.
For homeowners, the advantages are, of course, having an eager buyer and a long-term renter. These types of buyers will most likely take better of the house versus a standard tenant. There are cases that pose a risk to the renter who decides to opt out of the purchase. This decision will force the homeowner to go through the process of listing the house again.
Renters or buyers can also end up getting the upper hand with some deals. When and if the property’s value goes up more than expected, this factor can put the seller at a disadvantage because the seller will lose a considerable amount of money. It is important to make sure you are buying at the right time.