Owner Carry and Rent to Own are options for you to own your home in lieu of renting if you can't qualify for traditional or alternative financing.
Owner Carry (OC)
- The terms for OC properties are usually set by the Seller and all vary.
- Some Sellers over look documentable income requirements, credit history, etc. while others require documentation similar to traditional financing.
- Down payment, balloon options, amortization schedules all vary. Most are looking for a minimum of 10-20% down, 5-6% interest amortized over 20-30 years with a balloon payment in 2-5 years and no points or prepayment penalty. Balloon payment means you have to refinance, pay off or sell the property to pay the owner in full when the balloon come due.
- You become the owner and the seller/bank can't dictate what you do outside of what is written in the note, title does transfer at closing.
- There aren't many OC's out there because our economy is so strong but depending on what terms the seller is looking for and what your situation looks like we may be able to make something work.
Rent to Own (RTO also know as lease purchase)
- Properties that are offered in your MLS list as RTO are legitimate. There are a number of them out there from private parties that may be scams so be careful.
- RTO's are much harder to find for a few reasons. Most people need the equity from their homes to either buy another or reinvest, or at least a larger portion of it than a RTO offers.
- RTO's are risky for the sellers, a huge % fall apart and never change title, and the contracts HAVE to be drawn up by an attorney at the buyer or seller's expense.
- You'd also be dealing with the "landlord" factor and don't get the tax write off of ownership.
For both OC and RTO sellers require some or all of these forms of information from the buyer: income verification, credit info, tax returns, bank statements, rental history, proof of funds (mandatory).