Are you ready to be a first-time homebuyer? What first steps you should take? First, you will need a mortgage, a mortgage is a land agreement from a bank or building society. It will lend you money with interest in exchange from the title of the debtor’s property.
After that, you must have good credit scores to qualify for that property. Also, have cash for the down payment. Credit scores are the borrower’s face to the potential leaders in terms of scores. The Scores are between 300 - 800 show a consumer’s credit-worthy. Lenders use credit scores to evaluate that one can repay the loan in a timely manner or not.
Without these, you may have not gain homeownership. ■■■■… there is an alternative!!! What?
A rent-to-own agreement:
There is an alternative which is “A rent-to-own agreement”. In this, you rent a house for a specific amount and before the lease expires, you have to buy it. A lease is a contract between two parties, where one conveys land or other services to the second party with a periodic amount for a time-span.
Parts of rent- to-own agreement:
1. A standard lease option:
In this, you rent a property with the lease agreement for a certain time period
2. Buy option:
This is the other part that ensures that you can buy this property before the lease expires.
Non-refundable Option- fee:
In a rent-to-own agreement, a buyer pay to the seller, which is non-refundable. This fee called option fee or upfront fee, option fee, option- money, and option- consideration. This fee typically ranges from 1% - 5% of the land purchase price.
Types of rent-to-own contracts:
Lease – option
It gives a buyer the right that buyer can buy the house before the lease expires but it is not obligatory for the buyer. If the buyer does not want to buy the house, before the lease end, then he/she simply walks away, without any debt or continue rent to pay.
This is a more consumer-friendly and flexible approach.
Lease – purchase
But in lease purchase, it’s obligatory to buy a house before the lease expires. So, it’s more challenging. You should review all conditions of the contract before signing. It helps you to know, what exactly you are getting into!