Colorado Springs Rent To Own Homes FAQS

How can I buy a home when I have bad credit?

Colorado Springs Rent To Own Homes FAQ will attempt to answer most questions that come up about the program.  When you have bad credit, doing a Rent-To-Own might be something that will suit your needs.  We quite frankly don’t recommend doing Rent-To-Own deals.  If you can hold out and just Rent until you are able to qualify for a traditional loan, that is the best course of action. However, Rent-To-Own might be the way to go for your situation.  The Rent-To-Own scenario might fit you if it is realistic that you can bring your credit up to a 620 or 640 to qualify for a traditional loan.  By doing a Rent-To-Own it gives you the time to do what you need to do to get your credit where it needs to be.  The first step is to get paired up with one of your favorite banks or lenders or use one of our partnering direct lenders.  You need to get a baseline of where you are at.  If it looks feasible that you can get your situation where it needs to be in a certain amount of time then we’ll support you in pursuing a Rent-To-Own deal.  Your ability to make reasonable monthly payments and your desire to be a homeowner are important to us.  It is absolutely critical that you pay your rent on time every month and do the things needed in order to get approved for a mortgage prior to the end of the Rent-To-Own term.

Note:  If You have any collections, those will All need to be paid in full or removed prior to getting a loan.  No lender will approve a loan if a buyer has any collections.  If you only have a $1000 worth of collections then it may be manageable for you to pay those off in a few months with enough time prior to the end of your Rent To Own term.

If you have a significant amount of collections then it is likely that a Rent To Own is not for you.  It would be recommended to talk to a Bankruptcy attorney and see if that might be a better path for you to get a fresh start. Once you have a clear projection of when obtaining a Traditional loan is feasible, then pursuing a Rent To Own might make sense at that time.

Can you help me if I have a foreclosure or bankruptcy on my credit record?

Yes, we can help you if you have experienced a bankruptcy or a foreclosure.  We can help you if you have any type of negative credit history or even no credit history at all.  We can put you in touch with one of our partnering direct lenders or even speak to your lender of choice to work with them to help you get back on your feet.

Do I have to ‘qualify’ for this program?

Not in the usual sense of having to meet certain income and debt ratios, or achieving a certain credit score as would be necessary for most mortgage companies. Your credit and finances are not the restriction they would be with a conventional mortgage company. Although it actually makes sense to buy a home this way even if you could get conventional financing today, many of our buyers do have some issues that need some time to be resolved.

You do have to get a desktop underwriting with one our our partnering direct lenders or a lender of your choice. A desktop underwriting is where a bank or lender takes about 20 minutes to pull your credit report and reviews your history.  We need to get a baseline as to where your current situation is and see if it is even realistic for you to pursue a Rent-To-Own.  We want you to be successful and it would not be ethical for us to knowingly put you in a situation where you would not have a chance to follow though on purchasing the Rent-To-Own property.

Note:  If You have any collections, those will All need to be paid in full or removed prior to getting a loan.  No lender will approve a loan if a buyer has any collections.  If you only have a $1000 worth of collections then it may be manageable for you to pay those off in a few months with enough time prior to the end of your Rent To Own term.

If you have a significant amount of collections then it is likely that a Rent To Own is not for you.  It would be recommended to talk to a Bankruptcy attorney and see if that might be a better path for you to get a fresh start. Once you have a clear projection of when obtaining a Traditional loan is feasible, then pursuing a Rent To Own might make sense at that time.

How much option consideration money do I need?

We minimally require 3.5% of the purchase price up front which is the option consideration that is paid to the seller and noted as down payment money in the contract.  It is possible to obtain a Rent-To-Own with less than 3.5% but it is Very difficult as most sellers won’t take anything less.  The reason for the 3.5% down is because that is the FHA minimum down payment requirement and most buyers buy with an standard FHA loan.  If you are a Veteran and qualify for a VA loan, then putting money down on a property doesn’t really make sense and it is best to hold out and rent rather than pursue a Rent-To-Own.

Is the option consideration money non-refundable?

Yes!  If you break the lease or don’t pay your rent, you forfeit all of your option consideration money.  However, if you follow through on purchasing the property, the option consideration money goes toward the purchase of the property and is noted as such in the contract.  So you need to make sure you pay the monthly rent on time and adhere to the other requirements in the contract and in the end follow through on purchasing the property.

How long is the Rent-To-Own period for?

It depends on your situation as to how long the Rent-To-Own period is for.  Based on your lender review and the projection of when it might be feasible for you to obtain a traditional loan by doing certain actions, then we’ll structure the Rent-To-Own term with more buffer time than what the reasonable projection is for you to obtain a traditional loan.  So if it looks reasonable that you should be able to follow through to get a traditional loan in 1 year, then we’ll at least push to structure the deal to be 18 months before you would have to buy the property.

However, you may buy at any time within the length of the agreement. You do not have to wait till the end of the agreement.  We realize Life happens and that is why Rent-To-Own has risks with it, because you the buyer have some uncertainties and that is partly why you may be pursuing a Rent-To-Own.  Perhaps you are hoping to get that better paying job in 6 months and pay those few collections off within a few months, but again Life happens and Life is risky.  But then again buying a home normally with a traditional loan has risk with it too in that you have to keep your job and pay the mortgage on time or you will lose that house too.

How flexible do I need to be?

You need to be flexible in your terms as there is no standard.  Each Rent-To-Own deal is different.  Rent-To-Own deals are the most difficult deal to put together and a lot of Real Estate agents don’t do them and don’t like doing them.  We don’t like doing them, we don’t advocate them, and recommend if at all possible that people rent until they are able to follow through and get Pre-Approved for a traditional loan.  However we realize that there are buyers out there that want to pursue this for their own reasons and we’ll support them.  The responsibility of following through on the Rent-To-Own deal is fully the responsibility of the buyer.

Minimally it takes 3 weeks to put a Rent-To-Own deal together once a property is found because Rent-To-Own deals are non-standard.  The contracts are not Colorado Real Estate Commission approve documents as they are not provided by the commission.  So each deal requires that attorneys review the contracts or the parties involved or that the parties to the contract are afforded the opportunity to submit the contracts to an attorney of their choosing.  So once the contracts are drafted up, there is time involved to pass the contracts back and forth for legal review and hash out the details.

Is the price of the home established in advance?

Yes. The price of the home is decided at the time you sign the Option to Purchase and Lease Agreements and is not affected by the local market conditions.

Do you arrange for owner financing?

No, we do not arrange for owner financing.  There are properties that offer owner financing terms and if that is the path the buyer wants to pursue then we’ll support them in buying an owner financed property.  However owner financed properties typically require at least 10% down payment which is much higher than doing a Rent-To-Own and so most people don’t want to pursue them anyway.

Who pays the property taxes and insurance during the Rent-To-Own period?

The Home Owner does!  You pay the monthly ‘rent’ and utilities etc., until you actually complete the purchase.