Rent to own houses in Grand Rapids and Kalamazoo are a wonderful way to get on the road to home ownership. While there aren’t tons of these available (they tend to move quickly!), there are many advantages to this type of property.
First, you can move into a great house right away, and have a clear path to ownership. Rather than renting one place, while you look to buy another, you get a very convenient two-for-one deal. Secondly, if you don’t currently qualify for a mortgage, you can still live in a great house while building up your credit and down payment.
There are several other perks. You can try out a neighborhood before you fully commit to it, and make sure the schools are right for you and your family. You can take care of a home as if it’s your own, and really make it feel personal. The list of benefits goes on and on.
So how do you qualify for rent to own houses in Grand Rapids? While the conditions will vary based on the seller, here are a few basic guidelines to get you started.
1. Solid Income
Rent to own properties are rentals, but you also have the option to purchase it at some point in the future. Therefore, the seller will want to see that you can consistently make payments. If you have proof of reliable income and solid payment history, that is a great start.
While the income can come from different sources (your job, investments, public assistance, etc), the seller will want to see some good records. Pay stubs, bank statements, and other documentation are very common requests.
2. Ability to Get a Mortgage (Eventually)
Your goal is to eventually buy the home outright, and most people will need a mortgage to make this happen. As a result, the seller will want to see that you will eventually qualify for a home loan.
Different sellers will have varying timelines. Some will want to know that you can get financing within 6-12 months. Others will want you to purchase within 2-3 years. It depends on the seller’s goals, and the house.
They will likely want to see your credit report and credit score. They will check where you stand today, and gauge the overall trend of your finances. If you currently have a low FICO score, but are on your way up, you may still qualify.
This serves two purposes. First, it protects you, the buyer. If you’re unlikely to qualify to purchase the home, it is not fair to ask you to pay a large option fee. It also protects the seller, because they do not want to hold on to the property indefinitely.
3. Option Fee
In most cases, sellers will want a ‘Purchase Option Fee.’ This is typically non-refundable, and reserves your right to buy the home at a set price. The amount varies, but anywhere from 3% – 7% of the purchase price is typical.
The option fee accomplishes three things. First, it shows that you are serious about the property. Second, it provides some upfront cash to the seller, who is giving you the ability to purchase the home. Third, it helps you build credibility with mortgage companies, who can see that you are committed to this house (and have the discipline to save for a larger payment).
4. References
When sellers offer their homes as a rent to own property, they want to make sure that it will be well taken care of. They don’t want to see holes in the walls, broken fixtures, and stained carpets. So they will likely check references, to make sure that you will maintain the property.
This can include present or past landlords, employers, or personal references. Remember, you are working to make this your home. Both you and the seller want a house in great condition!
Different sellers will have unique requirements to qualify for rent to own houses in Grand Rapids and Kalamazoo. However, if you are solid on these four elements, you’re off to a great start.