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San Diego Bankruptcy Blogs from June, 2012


In a struggling economy, many people have suffered financial setbacks, but this doesn't mean that a great deal of American still hope to own their own homes. While owning a home is wonderful, poor credit ratings and other financial difficulties may make it hard for borrowers to qualify for home loans. If this is your situation, you may have considered renting to own your home. Rent-to-own may be a viable option for you, but make sure you understand the ins, outs, perks and drawbacks of your decision first.

When you begin renting a home to own it, the homeowner will charge you an "option fee." Usually around $5,000, an option fee will eventually become part of your down payment on the house. You will agree to pay the homeowner rent, as well as rent premiums. The homeowner puts your rent money towards his/her mortgage, and the rest of the money goes towards your future purchase of the home. When you buy the home, the homeowner will put your option fee towards the down payment of the house. You will not receive your option fee if you decide to back out of the deal.

Talking to an attorney before singing a rent-to-own contract is important because there is no standard contract between states. Each state has its own statutes and regulations. In order to fully understand the rent-to-own policies in your state, talk to a lawyer. An attorney can help you understand all of the financial implications of your rent-to-own contract, and will guarantee that there aren't any problems with the home's title.

Before signing a rent-to-own contract, you should also have the home inspected and appraised. Knowing its full value, as well as any unnoticed damages is imperative. When you are ready to take out a loan, talk to mortgage lender to see if you qualify and to understand your rental options. Until you actually purchase the home, you are still a renter and subject to laws that apply to renters, not home owners. Keep this in mind, because you can be evicted from your home if you do not pay your rent and rent premium every month.

If you are already a home owner but have had difficulty making your mortgage payments, you may be approached by rent-to-own scammers. In a rent-to-own scam, a buyer will approach you and ask you to sign over the deed to your house. They will most likely promise to pay off your mortgage in exchange for your home, but promise to rent it back to you. Never sign over the deed to your house – once you have done this there is no guarantee that you will not be evicted.

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