5 Advantages Of Rent To Own Homes

yard sign house for rent to ownYou may have heard of rent to own in terms of appliances or even car purchases, but you may not know that rent to own homes also exist. In today’s tough housing market, there are many reasons why rent to own listings are viable and even a good option for many people who want to get into a house and own their own place. Here are a few reasons to consider rent to own real estate.

No Mortgage Qualifying (Initially)

When you get into a rent to own deal, you do not have to go to the bank and get a mortgage right away. Given today’s market, qualifying for a mortgage can be very tough. If you have anything negative on your credit history or do not have enough money to use as a down payment, you can kiss your current chances at a mortgage goodbye. When it comes to rent to own homes, you do not have to worry about whether or not you will qualify for a mortgage because you will not need one right away.

Renting a home and working towards ownership is like leasing a vehicle. The seller will give you the right to buy the house for a certain amount while you are leasing. In the meantime, a portion of the money you put into the home in the form of rent will go towards the purchase price.


Easy Out

If you decide that you do not want to buy the home after the agree upon period is up, you do not have to move forward with the purchase. You will lose the rent credits you paid on the house, but you will not have to sell the home in a bad market and you will be able to move on with no strings attached. Renting the home first will give you a chance to discover any flaws the house might have. If you find that there are too many flaws or that maintenance is too much for you, you can back out of the deal once the time period is up.

Early Home Ownership

If you are used to renting an apartment or home, rent to buy is a great option for your next home. You will still be renting so the cost will be affordable, but you will have the freedom to do things to the home. You will maintain the yard and other aspects of the home just as you would if you were the home’s owner. You will get a good feel of home ownership and will really start to take advantage of everything that entails.

Lower Costs

When you buy a home using a Realtor, you have to have a down payment. Then you have to pay monthly mortgage costs and insurance and all sorts of other things. You may not even realize how much the costs will add up until you are in the thick of it. When you rent to own a home, you will pay the monthly rental fees and you will know what those fees are up front. You will likely not be liable for insurance costs until the home is yours. And you will not have a huge down payment to consider. You can use the months or years in your rented home to save up to actually purchase the home at the end of the agreement.

Build Equity

If you do not have great credit, use the rent to own method to build equity towards a home. You will not have to worry about your poor credit history and you will begin to repair it with a new track record of payments and equity. You do not have to involve a bank or finance committee and can rely fully on your own income for the deal to be beneficial.

While there are many advantages to renting a home and moving towards ownership, you will want to proceed with care. Make sure you have an attorney look over any paperwork that is required before you sign it. You want to make sure the owner is not tricking you and does intend to offer to sell the home to you at the end of the term. As long as you understand and agree with all of the terms, rent to own homes can be a good investment in today’s housing market.

The next time you see rent to own signs out in front of a house, look into the terms a bit further. Now that you understand a bit better what rent to own homes are all about, it might be an option for you for a number of different reasons. With today’s difficult real estate market, getting into your dream home any way you can is a priority. Consider searching free rent to own home listings to get you to home ownership faster than you would land in that position otherwise.

Current US Housing Market of 2014

It is now more than six years since the United States recorded a historic crash in the real estate market that led to a global financial crisis. The impact was very heavy because some prominent banks such as Lehman Brothers were declared bankrupt. Others such as Bank of America and Wells Fargo were rescued by acquisitions and merging.

However, alongside a beleaguered stock market and the bailouts, the prices of homes in the United States were falling drastically with cases of foreclosure rising at an alarming rate.

By July 2010, more than a quarter of all homeowners in the United States were underwater — meaning that their homes were now worth less than the outstanding mortgage. So, ever since that financial crisis, the real estate market has been slowly recovering over the years. Having said that, what is happening in the current real estate market?

Today’s Real Estate Market and Outlook

Since November 2013, mortgage rates have reached their lowest level in history, but this has not convinced people to apply for mortgage loans to buy houses. In fact, applications for home purchases have been falling by 3% week after week and now, May 2014, they are about 12% lower than this time in 2013.

Because of the recent uncertainty in Europe’s economy, the United State’s mortgage rates have continued to decrease. In addition, investors have turned to the bond market because it seems safer and this has pushed yields lower. Consequently, the United States rates of mortgage have followed suit.

In December 2013, there was a remarkable rise in sales of homes that were previously owned. This is an indication that the housing market in the United States is adjusting to higher borrowing costs. In 2014, the increasing employment rate, the rising of values of property, and the decrease of consumer debts are enticing prospective buyers to have confidence in home ownership. The demand for homes is another factor that is spurring home improvements and new construction. This is expected to heighten the gross domestic product or GDP.

Another report says that in the current real estate market, people are buying homes in cash despite the fact that many investors have left the market. The housing data firm popularly known as RealtyTrac released this report, adding that:

“the cash sales of residential property almost hit 43% during the first quarter of this year from almost 38% in the previous quarter. These figures are an indication that the housing market is recovering. However, experts such as Blomquist have analyzed the figures and concluded that the sales might not last for long because the cash buyers are mostly the wealthy Americans who buy for prestige and are not real players in the market. The real estate companies and institutions who can buy at least fifteen residential houses in a year are slowly pulling out of the market.

graph real estate

Aftermath of 2008 Recession

Florida, which was affected badly by the recession of 2008, reported the highest five markets for sale of property in cash. In fact, Lakeland reported 62%, Miami 67%, Palm Bay 64%, Cape coral-fort Myers 74%, and Sarasota 65%. Other areas also reported that half of the total properties listed were sold in cash and they include Detroit, which reported 53%, Columbia 56%, New York 57%, Memphis 55%, Las Vegas 52%, and Atlanta which reported 53%.

The bad weather experienced in the Midwest and northeast this year is feared to have caused the decline in sales because demand was very low during that period. Supply restraints are also believed to have held back the market in those regions. While these are major concerns, the United State housing will remain undervalued at 4% when compared to other economic essentials such as the cost of rent and consumer incomes.

The ongoing house construction across the states in the United States is a major factor contributing to the recovery of the housing sector. This is because construction is a form of employment for different specialists such as plumbers, casual workers, and civil engineers. Their employment means higher gross domestic product which affects the economy positively, and consequently the housing sector.

foreclosure sign front of house

Foreclosures Trending Downward

On the other hand, filings for foreclosure were reported to have gone down with 1% in April as compared to March, with 115,830 properties listed for foreclosure. While the foreclose activity in April was lower than in March, the repossessions of banks in April increased by 4%.

In fact, in April, a total of 30,056 nationwide bank repossessions were reported. A total number of 49,239 properties were listed for foreclosure auction scheduled in April, a number which was lower by 3% from that of March. This process started and many homes were foreclosed in April, and this report was provided by RealtyTrac. This shows that in 2014, the housing market in the United States will be moving towards recovery.

From the statistics, the investors should not be afraid to invest in the current real estate market of the United States.

home for sale sign

Current Climate For Real Estate Mortgages And FHA Loans

Without a doubt, a mortgage is the biggest commitment that any person makes in their lifetime. As such, it is a good idea to be informed instead of wandering without any information about the subject. As we head into the year 2014, local as well as international indications suggest a healthy year for real estate and property. The headwinds observed in 2013 generated by tight credit for home mortgages are going to remain stronger for a while. Obtaining a real estate mortgage was a daunting process in the year 2013 not because of marginal qualifications but due to strict underwriting scrutiny. fha mortgage info

Current mortgage climate for 2014

Despite these headwinds, 2013 was a good year for obtaining a real estate mortgage. Fortunately, the trend is likely to continue even in 2014. In fact, it is estimated that the number of people buying real estate will increase to a considerable extent in the current year. There are many reasons for a favorable buying environment. First of all the qualified mortgage rule is now in effect; it is meant to safeguard the interest of consumers. According to this rule, the buyer’s ability to pay back the loan is carefully assessed and supposed to be a key factor. If the buyer becomes qualified to avail a loan according to the new mortgage rule, there is no reason why his mortgage application will be rejected. Another indication in favor of property buyers is high drop in the rate of interest. During the last year (2013), the rates of interest have come down. This has created a conducive situation for buyers to avail a loan for buying real estate. No matter whether you are hunting for a small property or a big real estate, the climate is encouraging to buy any property. Yet, the tight credit situation of the economy still prevails. Even so, it is likely to ease over a time period. When this happens, it will open up doors for banks and lenders to offer home loans quite comfortably to potential buyers. If you have made up your mind to apply for a real estate mortgage, it’s the right time to apply and avail a loan due to low interest rates and more favorable buying environment.

How much more difficult it is to qualify for an FHA mortgage

It is true that FHA mortgage loans have become more expensive in 2014, but FHA mortgage buyers have an edge over conventional mortgages. The main reason is FHA loans are assumable; it means that a buyer can take over the seller’s existing FHA loans rather than applying for a new mortgage at the current mortgage rate. This can be extremely handy given that FHA mortgage rates are expected to rise in 2014. Likewise, the enticement of a lower interest rate (future interest rate) can help you attract a great number of buyers when you decide to sell your home. However, there are many more reasons why availing an FHA real estate mortgage loan is far easier than a traditional loan. While applying for a mortgage loan at a conventional lender, your credit score must be 640 or more in order to get approved for the loan. On the other hand, you can avail an FHA mortgage with a credit score of as low as 580 points. Similarly, you can qualify for a mortgage even if you are able to pay just 3.5 percent as down payment amount. All such benefits are not present in a regular mortgage loan. FHA loans enable sellers to pay up to about 6 percent of the loan amount to cover the buyer’s cost. In traditional loans, sellers can pay only 3 percent of the loan amount. For a lot of homeowners, this is a great benefit. However, FHA loans have few downsides. The upfront as well as annual mortgage insurance premiums are extremely high; this is the main reason why FHA loans have become expensive in 2014. Despite these price rises, FHA loans can be highly beneficial to any home buyers. Furthermore, the eligibility criteria to get an FHA loan are favorable for buyers. As a result, even folks with limited financial resources are able to get a real estate mortgage by availing FHA loans.

Closing words

The current climate for buying real estate is in favor of buyers on account of low rates of interest and relaxed mortgage terms. Even so, FHA loans can be a better real estate mortgage deal for most home buyers. Although the cost of FHA loans has increased, you can easily qualify for an affordable FHA loan. Start early and make sure you have everything handy beforehand while applying for an FHA loan. Similarly, evaluate all possible options to increase your chances of getting a loan. If you act prudently, and assess your financial standing in the light of current mortgage rules, you will definitely qualify for an FHA loan with no trouble.