Avoid These Rent to Own Home Mistakes!
If you are tired of renting but do not presently qualify for a home loan, you may be looking at rent to own home listings. Renting to own can certainly be a step in the right direction, but there are some things you need to be aware of so that you make the best decisions for you. Let’s look at some common errors that people make.
Not Getting Payments Reported to the Credit Bureaus
When you rent to own a home, your primary goal is to qualify for a mortgage and purchase the home. This means that credit restoration needs to be a major focus for you. The number one determinant of your credit score is your credit history. This means that you need as many positively reporting accounts as you can possibility get.
There are many services who will collect your payment, report it to the credit bureaus and then forward the payment to the home owner. For just a few dollars a month you can establish a new trade line with a high payment. This will pay off when it is time to get a mortgage.
Doing a Lease Option or Lease Purchase when a Contract for Deed is Better for You!
There are many times when renting to own or lease options make sense, but not always. If your credit is already fairly good and you are confident that the home is one you want to make your own, a contract for deed can be much better for you financially.
One of the biggest motivators to do a contract for deed is that it qualifies you for the First Time Homebuyer Tax credit of $8,000. Many states offer a credit on top of this too! Also, a properly structured contract for deed or owner financed transaction will allow you to write off the monthly interest expense.