- Many folks do not realize or know that renting-to-own is a real option for them TODAY if they feel they are not currently in a position to own a home right now (maybe due to challenged credit, for instance), but they ultimately do want and desire the many benefits of no longer having to rent.
- Our rent-to-own program is a flexible program designed to help you move into the home TODAY that you eventually want to own (called “Exercising your Option to Purchase”) as it gives you the time you need to address any temporary items that may be keeping you from your goal and dreams of home ownership, all the while you are enjoying LIVING in your dream home!
Although our rent-to-own program is quite flexible, it really is designed for folks who do want to become homeowners in the next year or two.
It allows you to move into the home you want TODAY and gives you the exclusive option to purchase later down the road after move in. That’s why it’s also referred to as a Lease-Option or a Lease with an Option to Buy….
Instead of a refundable security deposit, there is a NON-refundable Option Fee Down Payment (OFDP) due UP FRONT prior to move in along with 1st full month’s rent….
100% of the OFDP counts towards the option price of the home later on when you go to exercise your option to purchase the home (so it’s NOT like an extra fee just to rent-to-own…ALL of it counts towards the home), but it is always going to be much more than a typical security deposit for a straight rental…
- The MINIMUM to put down for an OFDP is typically 3.5% of the Option Price of the home or $7,000.00, whichever is greater.
- For the monthly rate, it is VERY rare that we get a home with a monthly rate less than $1,350.00 per month. Most if not all of our homes will at least be $1,350.00/mo or more.
- It all depends on the Option price and the Owner.
- Your OFDP can come from multiple sources including: gift money, 401k, pension/retirement, etc. You can even pledge your tax refund!
There are several significant differences. The biggest difference would probably be that instead of a security deposit that is standard with a straight rent-only rental, there is an Option Free down payment (OFDP) (sometimes referred to as an “option fee” or “down payment”) that is required up front prior to move-in along with first full month’s rent. 100% of the OFDP counts towards the Option Price of the home (so it’s NOT like it’s an extra fee to just to rent-to-own), but it is always going to be much higher than what a typical security deposit would be….usually in the range of 3.5-7.0% of the Option Price. See below for more answers regarding the OFDP.
- Submit a Property Showing Request for the home you are interested in or Free Online Application 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 you haven’t already for each adult. Even if you haven’t found the right home yet, you can still get your application going so you’ll be ready to go when you do decide on a home.
- Complete and submit all items in our “Next Step” email (don’t worry, it’s not that much!).
- 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 Build My Scores. Their initial consult is FREE! and most times we can get your credit repair expense counted as part of your Option Fee down payment (OFDP)!
- Once all application items are in, we present to the Owner for a PRE-approval.
- If PRE-approved, funds are submitted in escrow if haven’t already (full OFDP and first full month’s rent will be due prior to move-in and can be submitted at any point during this process).
- Final checks completed (Background & Rental History verification). Once those come in good, your PRE-approval automatically turns into an Official approval!
- Sign agreements (we do this electronically! No more meeting across town, scanning, faxing, etc!)
- Meet the Owner for property walk-thru, get the keys and move in!
- Let us know if you need Mortgage Broker or Closing Attorney referrals! We are not a lending institution and it will be your mortgage broker who will help you get your home loan when you’re ready to exercise your option.
- After you’ve settled in we can schedule a “Meet & Greet” with a home loan officer who is also a specialist for all the Home Buying Programs…there are over a DOZEN of them in Rhode Island and chances are you may be eligible to take advantage of 2+ or more and get FREE MONEY at closing when you are ready to exercise your Option to buy!
There are numerous benefits to renting-to-own:
- You can move in the home you want to eventually own NOW knowing that the funds you’ve put down as an Option Free down payment (OFDP) are going towards the home 100%. In other words, the OFDP is NOT an extra premium fee that you’re paying just to rent-to-own.
- Typically when you get an 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 up an even higher 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 can make the banks work for YOU by having the freedom to explore all competitive offers.
The qualification process is quite simple…from your application we will verify rental history, employment/income and background/public records. Plus we’ll have a credit repair specialist review your reports to make sure we’re setting you up to win with enough time and a game plan on what you need to do regarding your credit.
* 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! Your credit consult is FREE and will help determine a plan for you to successfully exercise your option on 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.
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 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/be added 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 longer. Everyone will be different so that’s why we get you a FREE analysis from credit experts.
We have an EXCELLENT credit repair company 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! You just need to do your part! We get you connected to an Owner with at least an 18 month contract, so that’s plenty of time. ***BONUS!*** Most times, we’re even able to get your credit repair expense to count as part of your Option Fee down payment (OFDP)!
Some of our Owners 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, tried out several companies and one by far stands out among the rest in terms of RESULTS and AFFORDABILITY. Please check out why we refer our clients to NBCC by clicking HERE.
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 can be lendable again. No problem! We make sure we match those clients up with a home whose Owner is willing and able to extend or start off with a longer term. Again, the beauty of how flexible and customizable a rent-to-own transaction can be is one of our favorite aspects of our rent-to-own program!
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!
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 18 months (or more), depending on the Owner. Most of our terms are for a year and a half. Some of our Owners can be even more flexible and can do a 24-month term with the option to renew for two 12-month extensions, too.
Every Owner is different and every home is different. Typically somewhere between 3.5-7% of the Option Price is what the Owner is looking for as an OFDP. We have found that the higher the OFDP (especially if it’s MORE than the minimum), the more flexible our Owners can typically be on the terms. You are going to need these funds anyway in order to exercise your option, so the Owner is simply requiring that this be taken care of up front. Plus it’s easier and quicker to get qualified for a loan as 100% of your OFDP goes towards the Option Price when you are ready to exercise your option.
In order to be competitive with other applicants, we encourage you to save up at least $6,000 or 3.5% of the Option Price (which ever is greater), plus first full month’s rent. Again, it’s not that the Owner won’t work with you for less. It’s just likely though that there are other applicants who are at least offering those amounts.
Yes! Many clients have taken out loans from their 401k plans for their OFDP. 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. 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.
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 Owner 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 Owner and typically they are delighted to have a qualified applicant ready to go!
In general, if there are no delays an application can be processed in as little as 1 week and be ready to present to the Owner. The final decision does not lie with us and once the completed application is in the Owner’s hands we all await his/her/their 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, however those applicants who already have funds in escrow do get bumped up in priority. Additional applications will continue to be accepted until the Owner approves an applicant, contracts are signed and all funds are tendered as agreed. If contracts are signed but only partial funds have been received, 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 Owners 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.
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 clients deposit certified funds or cash (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. Funds drawn off a credit line can have up to a four week hold! But since we require certified funds or cash, there typically is no delay whatsoever.
Chances are very good that the Owner will allow what is commonly referred to as a “rent credit”. Many times this will depend on your final Option Fee down payment (OFDP) amount. Let’s say the Owner agrees that for every monthly payment made by the 1st of each month, the Owner will reduce the Option 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 Option price. So let’s say you exercise your option to purchase the home during month 18 of your agreement and have made ALL of your rent payments on or before the 1st of each month. The Owner would then reduce the Option price by $2,700 (18 x $150.00). So if the Option price is $185,000 then it would be reduced to $182,300 and 100% of your initial OFDP is now applied towards the LOWER Option price! Another option you may have is to keep the Option price the same, but have the Owner pay $2,700 of your closing costs.
Yes! 100% of the amount that is submitted for the OFDP goes towards the house!!! This is clearly and explicitly written into the agreements.
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 rent payment due the following month will be a PRORATED amount for whatever days you actually occupied the home in that initial month.
Since our homes tend to go fast, we recommend to start looking at our homes when your 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 Owner hold a property for you, but it would require your full Option Fee down payment (OFDP) 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 Owner to hold the property for you.
For the first 30 days anything and everything materially affecting the livability of the home is 100% on the Owner. After that, the home warranty in place typically covers everything else…you just pay the deductible (typically $75-$100 per claim). With a property that has been completely renovated (where everything is brand new) sometimes the Owner opts not to have a home warranty because everything is covered by the Manufacturer’s Warranty.
Absolutely. Keep in mind, whenever required by state/county law, our Owners have to obtain 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 home is accessible.
Generally…yes, but it is a case by case basis. The businesses that get turned down typically are day care or assisted living businesses due to the liability incurred for the property Owner.
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”. Even though with rent-to-own you are likely getting any loan down payment requirement out of the way up front, you still want to be setting aside funds for closing as not all loans allow you to roll these costs up into the loan.
The best resource to get the most accurate estimate on your closing costs will be from your mortgage broker or lender. We are not a lending institution so we are unable to provide you with what is called a “Good Faith Estimate” which typically outlines your future mortgage payment and anticipated closing costs.
For anyone purchasing a home in Rhode Island, whether through rent-to-own or not, a rough ball-park estimate of closing costs would be:
- 3% for transfer taxes based on the agreement price
- + 1% of contract price for title work fees/attorney fees
- + 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 agreement 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 Owner has a closing company that will offer a discount on the transaction.