Folks with poor credit have trouble securing house financing through a normal bank mortgage, making it difficult for them to buy their ideal home, even though they are highly incentivized to be home owners.
The good news is there is a time-tested home-owning solution that involves private investors in a home ownership program usually called "rent to own".
Rent-to-own, or lease-to-purchase, is a program where the prospective homeowner, instead of seeing their monthly housing payment go completely to rent, has some of their monthly cheque contribute to their future ownership of the home.
This is possible because a real estate investor has already committed funds to secure the property. They're prepared to help a motivated family to have a less complicated road to home ownership for a fair return on investment.
The programme has these elements:
1) A Modest Deposit. Rather than meeting a bank's requirement of 15-25% of the house price as the down-payment (typically found in Toronto or Hamilton in Canada) and having a sound credit rating, the cash required can be as little as $5000 to get the project started.
2) A Fixed Selling Price. Based on market conditions and the investor's desired investment return (for helping the prospective new home owner become involved in a home purchase) the selling price for the house is fixed in advance.
3) An One-to-Three Year Agreement. With regular payments now making a contribution to building equity in the house, gaining the time necessary to fix/improve credit so that one can ultimately qualify for a standard mortgage is crucial.
4) The Ability to Meet Monthly Obligations. A regular household income that covers all monthly costs (food, car, telephone, rent, etc) is essential. It can be one or two wage earners in the family, but what's most critical is the ability to meet monthly financial commitments to establish a good record.
With these elements in place (an investor, an inspired home purchaser, time and commitment), there's a good opportunity to create a Win-Win situation: a motivated family realises home ownership sooner than later and an investor realises a safe ROI.
The good news is there is a time-tested home-owning solution that involves private investors in a home ownership program usually called "rent to own".
Rent-to-own, or lease-to-purchase, is a program where the prospective homeowner, instead of seeing their monthly housing payment go completely to rent, has some of their monthly cheque contribute to their future ownership of the home.
This is possible because a real estate investor has already committed funds to secure the property. They're prepared to help a motivated family to have a less complicated road to home ownership for a fair return on investment.
The programme has these elements:
1) A Modest Deposit. Rather than meeting a bank's requirement of 15-25% of the house price as the down-payment (typically found in Toronto or Hamilton in Canada) and having a sound credit rating, the cash required can be as little as $5000 to get the project started.
2) A Fixed Selling Price. Based on market conditions and the investor's desired investment return (for helping the prospective new home owner become involved in a home purchase) the selling price for the house is fixed in advance.
3) An One-to-Three Year Agreement. With regular payments now making a contribution to building equity in the house, gaining the time necessary to fix/improve credit so that one can ultimately qualify for a standard mortgage is crucial.
4) The Ability to Meet Monthly Obligations. A regular household income that covers all monthly costs (food, car, telephone, rent, etc) is essential. It can be one or two wage earners in the family, but what's most critical is the ability to meet monthly financial commitments to establish a good record.
With these elements in place (an investor, an inspired home purchaser, time and commitment), there's a good opportunity to create a Win-Win situation: a motivated family realises home ownership sooner than later and an investor realises a safe ROI.
About the Author:
Liberty Property Services goal is to helping Ontario home buyers sell and purchase homes through innovative rent-to-own programmes
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