In the recent time, the rent-to-buy homes or the lease-to-own homes as they are alternatively called have gained popularity amongst the masses. This rise has been seen because of the increasing property rates and high mortgage rates as well. This option helps the tenants to buy the house in which they are already residing after years of renting. Getting into this deal is quiet flexible as it does not come with special requirements or terms and conditions. This article deals with certain options during which this strategy is the most effective option. So read carefully to know more.
If you are dealing with bad credits, securing a home loan might seem to be a difficult thing. However, even if you are able to get your loan approved from a financing institute or a bank you will have to pay higher rate of interest. But when it comes to rent-to-buy home deal, the home can be secured with ease. As you have agreed upon the rental terms, you have the opportunity to buy the house at a set price which is bound to remain unchanged.
A portion of the rent goes in building the property equity and thus the tenant would have enough time in his hands approximately 4 to 5 years to build his credit score. Since the tenant contribution will be discounted from the final price, he would have higher chance of securing the home loan as the amount decreases from its original price.
Bankruptcy and foreclosure
If a person has recently gone through bankruptcy or foreclosure, he would have to wait for few years before he can apply for the loan in order to purchase a house. The time period can be used for building equity in the house which can be purchased at later dates. This is one of the easiest methods to avail home loan. A person having bad credit score or the one who have recently faced foreclosure is termed as a high-risk borrower therefore lenders and financial institutes avoid giving them loan.
Various lending institutes and banks require the borrower to place a security deposit equaling to about 20% of the price of the house. This percentage converts into a lot of money for young people who have just started their families and are faced by various expenses. Therefore for all those people who do not have sufficient money choosing the rent-to-own deal can be the best option. This alternative can help them to secure a low interest rate home loan at later dates. However it should be remembered that the deposit once made cannot be refunded therefore the decision should be made wisely.
No stable employment
If a person changes his job frequently his loan application is most likely to get rejected but if you have opted to stay in your job for a longer period of time, you can easily choose the lease-to-own option. If you become stable in a job, financing institutes or banks would also offer you home loan easily and sometimes may be at lower rate of interest. So make a serious decision after talking to your family about the deal.
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