Rent to Own may be a Good Option.
For many folks who have seen difficult financial times during the recession, the Rent to Own option is a blessing. If done correctly, it can be a way to move into a great house now while setting a portion of your rent aside as your down payment for the future. A forced saving of the down payment in a way, while credit is being re-established or repaired. This is particularity valuable for past Bankruptcy or Consumer Proposal folks.
There are companies that specialize in Rent to Own and they provide the property to the future buyer. They will ask for a deposit and then the fair market rent will be established. The future homeowner will be required to pay more than market rent each month, with this amount being set aside for the down payment when the property is transferred into their names. (This is a requirement of CMHC for the future mortgage approval)
The extra funds are calculated based on how much actual down payment will be required for the completion of the sale and it will be divided into monthly amounts according to the length of the rental agreement. The normal length of time for a Rent to Own would be one or two years to allow the future homeowner time to repair their credit.
Investors who wish to buy a property within a Rent to Own company can be the one providing the house and have access to willing future homeowners through the Rent to Own company. They may even have the payments managed for them for a small fee.
If a person has seen their credit affected negatively and they have either had credit counseling, a Consumer Proposal or even a Bankruptcy and they are discharged, it is possible to rebuild credit to a point where they can once again qualify for a mortgage.
The general guidelines for buying a home with 5% down after Bankruptcy or Consumer Proposal according to CMHC are as follows:
2 full years discharged from the Bankruptcy or Consumer Proposal
1 full year of clean re-established credit of about $5000.00
Down Payment from own Sources
1.5% of the Purchase Price as closing costs from own sources
A confirmed stable income source
Credit from sources other than just store cards is one thing Mortgage Lenders look for.
Secured Master cards from Capital One or Secured Visa from Home Trust are the first building block to restoring credit. These should be followed up with a Loan or Line of Credit from a Bank, Trust Company or Credit Union.
Access to this Rent to Own firm is not an endorsement of their service. It is intended to provide information only.
If you have bruised or bad credit and you want to get back on your financial feet so you can own a home, contact us! “Your Durham Region Mortgage Doctor” may be able to help!