Rent To Own . . .Is It A Good Idea?

I often get calls and inquiries from hopeful buyers who want to look at "rent to own" options.  I get the feeling these buyers want to own a home so very badly, that they are willing to do anything to call a home there own and rent to own is usually the last resort.  While a rent to own can work out for both the buyer and seller, these are usually set up to protect the seller.  Here are 4 things you should know about rent to own homes.

1.  OPTION MONEY

Most buyers look at this route because of bad credit, and sellers know this.  The seller will usually require 3%-10% of the purchase price as "option money".  This money is held in an escrow account (with a neutral, third party) for the duration of the rental.  Once the rental term is up (usually 1-5 years), the money is used as the buyers down payment for the purchase.  If the buyer decides to not purchase the home, the seller keeps the money.  So what happens if you decide you don't like the house, or interest rates go up and you can't afford the house?  What happens if your job transfers you, or life changes and the homes doesn't work for your needs?  You lose the money!!  This is perhaps the biggest reason I caution buyers to carefully consider a rent to own.

2.  RENTAL MONEY

Along with the money the buyer puts in the escrow account, the buyer will also pay a monthly rental fee.  This money is not credited to the buyer in anyway, other than allowing the buyer to occupy the home for that month.

3.  IF SOMETHING BREAKS

Unlike a normal rental, most rent to own situations are set up in such a way that the buyer is responsible for all utilities, maintenance and repairs.  If something breaks, the buyers is fully responsible.  Although you are renting, you lose some of the best rental "perks".

4.  PURCHASE PRICE

One benefit of a rent to own can be (although not always true) the locked in purchase price.  Many times the purchase price is agreed upon at the beginning of the lease.  If the option to buy isn't due for 2-5 years, it is likely homes prices could go up, locking the buyer in to a great purchase price with instant equity.  On the flip side, if the market goes down, you could be stuck with a home that won't appraise (meaning you can't get a loan on it).

CONCLUSION

In my opinion, I would much rather see an anxious buyer practice some discipline and patience, work on their credit, save up some money and buy a house the traditional way!  It is almost always a safer bet for the buyer.  I know it is hard to be patient, but every buyer that I have walked with down this road, is much happier at the closing table when they wait.

If you are anxious, excited and ready to buy, but still have a long road ahead of you to pay off/down debt, fix credit, save some money, let's talk.  One of my favorite parts of this business is walking alongside those buyers and getting them to the buying point.  The reward for me is handing those buyers keys to their new home after months and often years of preparation!  Don't wait - get started NOW!!!  And let me know how I can help you a long they way!

Jessica Adams
REALTOR
Cannon and Company, Real Estate Services
801.518.1806 (call or txt)

It's Still the American Dream . . .

Anatomy of a Short Sale

Top Reasons For Improved Housing

I attended the  Utah Real Estate Forecast Breakfast last week and took away some great info that I wanted to share with you!  No doubt our economy (especially real estate) has been on a crazy roller coaster in the last decade - but 2015 is looking strong, with steady growth, which is both healthy and exciting!  And so I have come up with the top  reasons for improved housing in Salt Lake in 2015!!

10. National Economy is Better!

In fact we saw a 3.9% economic growth in the 4th quarter of 2014 compared to the 4th quarter of 2013.

9. Job Growth is High!

In the 4th quarter of 2014, 250,000 new jobs per month were created.  125,000 are needed to keep up with the demand of new job seekers entering the marketplace, so to have double that number for three consecutive months is amazing!!

8. Pent Up Demand

Many of those who had to short sale their home have worked on their credit, waited the required time and are ready to purchase again!

7. Increase in Price!

At first, an increase in home prices may not sound good, but in fact, during the recession many home owners couldn't sell their home because they were upside down.  An increase in prices over the last couple years has put people back in the positive, allowing them to look at making a move.  In fact, home prices are nearly back to the 2006 level.

6. Housing Affordability!

Before you start thinking the increase mentioned in #7 is a bad thing . . . 68% of the population can currently afford the median price of a home (which is currently $255,000).

5. Household Debt is Down!

In 2006 the average household debt was 30% higher than their annual income.  Currently the average household debt is equal to their annual income (this is still really high, in my "Dave Ramsey" loving opinion, but it is progress).

4. Household Income is Rising!

To be completely honest, it's not rising a lot, but it is rising, nonetheless.

3. Mortgage Credit Access!

Right after "the crash" in 2007/2008 lenders, who would have given a loan to any warm body in 2006, tightened up their regulations making it very difficult for some of the best borrowers to obtain a loan.  As time has passed, the requirements have loosened up some, making a mortgage easier to obtain.

2. Mortgage Rates Are Low!

I mean, really rates are still in the high 3's and low 4's.  They wont stay there forever, so, please take advantage of them NOW!

1. Consumer Confidence

Let's face it, the attitude of the people drives the economy more than almost anything.  Confident consumers = spending consumers.  Consumer confidence has definitely been boosted in the last couple of years and it shows in the real estate market. Rates are low, home prices are competitive  . . . Now is a great time for real estate!!

FHA Lowers Mortgage Insurance Premiums

Great news for FHA buyers!!!

The Federal Housing Administration (FHA), a government insurer of home loans, cut 50 basis points (0.50%) from the annual mortgage insurance premium for FHA backed loans with terms greater than 15 years. For most FHA loans this will reduce the annual premium from 1.35 percent of the loan balance to 0.85 percent for case numbers assigned on or after January 26, 2015.

This Mortgagee Letter includes a table which shows the current and new annual MIP rates by amortization term, base loan amount, and loan-to-value ratio.

For the typical FHA applicant, the reduction in premiums means a savings of about $80 on their monthly payment, according to CoreLogic's chief economist, Sam Khater.

Please call me with any questions or for more information.

Kimberly Hendry
Sr. Mortgage Loan Consultant
NMLS# 288635 6925 South Union Park Center, Suite 150
Cottonwood Heights, UT 84047
Office: 801-312-8080
Mobile: 801-688-0599
Fax: 801-734-8815

$15,000 Down Payment Assistance Program!!

Such Exciting News!!!  I am so happy to bring you information about an AMAZING program to help out both buyers and sellers in Salt lake City!!!  Salt Lake is the 31st city in the entire country to offer this program!!  And so without further ado . . .

NeighborhoodLIFT Program

For Buyers:
1.  $15,000 down payment assistance on a primary residence (grant is forgiven 20% per year for 5 years.  If you remain occupying the home for 5 years, the total amount is forgiven).

2.  260 grants are available on a first come, first serve basis.

3.  FHA, FHA 203k, Conventional and VA loans are all available in conjunction with the grant.

4.  Home must be your primary and only residence (you can currently own a home, but must sell it to buy using the grant).

5.  Home must be located in incorporated "Salt Lake City" (this does not include neighboring communities like West Jordan, South Salt Lake, Sandy etc.).  See map below for qualifying areas (seen in green).

6.  You must be pre approved with Wells Fargo (please contact me for loan officer info), schedule and attend their home buyer event (December 12 and 13 at the Salt Palace) and take an 8 hour home buying seminar (available online and live).

7.  Home must be under contract within 60 days of being approved for the funds.

This is an amazing opportunity for qualifying buyers to get in to a home with no money out of pocket!!!  If you have been thinking of buying, don't miss this opportunity!!!

For Sellers:

If you have a home located in the mapped out area (seen above), and have been thinking about selling your home in this area, buyers will be abundant in the next 60-75!!!  NOW IS THE TIME TO LIST!!!  Buyers qualified to purchase using this grant will be out in full force ready and able to buy!!!

AND . . . you can take advantage of this as a buyer too!!!  If you are thinking of selling and buying in this area, you too can get $15,000 for a down payment!

This is one of the best down payment programs I have seen in years!!  Please don't hesitate and DON'T WAIT!!!  Call or email me today for more info, if you think this might be a good opportunity for you (Hint: it is a GREAT opportunity for you)!!

Jessica Adams, Realtor
801.518.1806
jessica@thecannonteam.com

Interest Rates and Your Buying Power . . .