Rent to Own vs. Zero down vs. FHA
Rent to own may be the saving grace many of you have been searching for. Here at AFTHA Program we know that the best way to help our clients is educating them on all the options they have available at their disposal. There is no “one size fits all” solution to home-ownership. Every person circumstance is different and the reason why a lot of people can’t buy a home is that they are trying to stick a square peg into a round hole.
For those who are having a hard time buying a home, there is usually 2 things holding them back, their credit and the down payment. 39% of would-be home buyers in America don’t get approved for a mortgage and another 16% don’t even try in fear of rejection. Even though the same two hurdles stand in the way of all these people, the reason they are there, to begin with, is unique for each individual case.
For some, a rent to own is a great option even though it’s hard to find the good deals and even harder to execute a fair lease option agreement. The sad truth is that 90% of people who enter into a rent to own agreement never actually buy the home and end up losing all the money that they invested.
For others, I would say the vast majority. Getting an FHA mortgage is the fastest, least expensive, and safest way to go. We can get most people approved for an FHA loan in as little as 30 to 90 days. Plus, most states have home buyer programs that help people come up with the money they need for a down payment. This money is usually in the form of a grant and doesn’t require the home buyer to pay it back as long as they live in the house for a set period of time. Here’s what on average a $200,000.00 home will cost you in the example below.
|Same $200,000 house in all examples|
|Items||Rent to Own||Down payment assistance and other zero down options||3.5% Down FHA Loan|
|Down payment or Lease Option Fee||Usually 2% to 5%
$4,000 – $10,000
|Security Deposit||Can be anywhere from $800 – $1,400||0||0|
|First & Last Month Rent Down||$2,400 – $3,400||0||0|
|Home inspection||$0 – $550||$0 – $550||$0 – $550|
|Home Appraisal||$0 – $500||$0 – $500||$0 – $500|
|Title and closing fees||You will pay this when you buy the house||$0 – $1,500||$0 – $1,500|
|Total Money Down||$7,200 to $15,200||$0 to $2,550||$7,000 to $8,900|
|Down Payment Assistance||Not Available||Available in most states||Available in most states|
|Monthly Rent or Mortgage Payment||$1200 – $1700 a month||$955||$921|
*The scenario above is only an example, your individual break down maybe be different.
If you could use our help with figuring out what option is best for you, don’t hesitate to reach out. Call, or email us today with any questions you may have before getting started.