Rent-to-Own with No Credit Check
Honestly, it’s really hard to rent-to-own with no credit check. In fact, it’s almost non-existent. But, the good news is: it can be done.
Let’s face it, if you want to rent-to-own with bad credit, the landlord is going to want more information about you. Indeed, the most compelling reason to check credit is to check to see if the tenant is responsible with regard to paying bills. Typically, if a renter tells a landlord, “Please don’t look at my credit.” The first thing the landlord will want to see is a credit report.
Typically, it’s not “good enough” for a landlord to hear, the phrases, “You can trust me.” and “I’m working on it.” and “Please rent to me anyway even though I have bad credit.”
However, Home Sweet Home offers a very specific strategy to get people into a home. Basically, it’s a legal document and provides a powerful check on bad credit. Certainly, once the sellers have this document in hand, it provides a powerful motivating factor to open the doors to homeownership. NO ONE else in the market has anything like this legal document. This document can only be accessed through the Home Ownership Program (see video at the bottom of page).
Additionally, high income is a huge help in getting a home.
No Credit Cases
How to rent a home with no credit? Good question. Ever hear the aphorism, “No credit is better than bad credit.” For sure, this is a true statement. As a matter of fact, people with no credit have a better chance of getting into a home than renters with bad credit. It’s so true. Why? In most cases, a case of “no credit” indicates a “better chance” of renter responsibility. In other words, nothing NEGATIVE is reporting on the credit report. That’s good.
On balance, the absence of credit or “no credit” and “no credit score” also indicates a “lack of data” for a tenant’s credit report. Withstanding this, there is little more than 50/50 odds the tenant will act in a responsible manner with regard to paying bills and rent.
Again, Home Sweet Home offers a legal document to address this issue that can be used to significantly increase a rent-to-own closure.
How Rent-to-Own Works
Normally, rent-to-own is all about renting and “progressing” towards owning. In general, it’s basically 2 contracts in one. One contract is a lease and the other is a purchase agreement.
Rent-to-Own Rental Credits
In large part, rental credits make rent-to-own arrangements very popular. Renters can be credited part of their rental payment towards a down payment. It’s a really great savings plan. But, there are important considerations:
- Make sure rent credits are discussed with the loan officer. Some loan programs require rent payments to pay rent SEPARATE from equity payments (payments made finance the down payment). TWO separate payments may be required to send to the landlord: (1) The market rent payment (plus any risk premium due to bad credit); (2) An additional payment to finance the payment.
- In other cases, a portion of the rent may be applied towards the downpayment. This makes a great savings plan for down payment financing. And, the landlord may only allow up to a certain portion of the rental payment to be applied to a rent-to-own down payment.
Rent-to-Own Financing Considerations
Why? It’s important to find out about a few things. Definitely, you will need to figure out how much you can afford. Part of the payment “breakdown” will include principal, interest, taxes, insurance. On top of this, you will need to know the “price range” to get into a home. Finally, special assessments may apply. Usually, 20% of any house payment covers taxes and insurance. Whereas, 80% of a house payment covers principal and interest.
On a final note, some houses in neighborhoods may not qualify for “higher-end” conventional financing. This means the price of the house may exceed conventional loan limits. What’s more, the home may need to fit into a “jumbo” mortgage category.
Not to mention, the down payment may be anywhere from 0 – 20% depending on the loan program. Understanding if a loan program will break up the mortgage in 2 parts is important. The financing sometimes needs to be “split up” into a “first” and “second” mortgage.
This will also affect the down payment required. In some cases, lenders may allow a seller to carry financing on a “second” mortgage for financing purposes. Certainly, the positive upside is that second mortgages can help “offset” downpayment requirements.
A Little Extra “Insurance”
All things considered, getting the lease and purchase agreement reviewed by an attorney is advisable. Home Sweet Home offers a legal plan for about $25/month (and is great for year-round legal protection). Furthermore, there is ID theft protection.
Also, it’s important to get a home inspection too prior to entering into a contract. Surely, understanding any problems with the property are key considerations prior to buying.
Searching for the “Perfect” Rent-to-Own House – Environmental Concerns
Unfortunately, many homes are located near “not-so-safe” and “not-so-pleasant” environmental areas. These include airports (noise); radioactive dump sites; radioactive plants; chemical factories; and dumping grounds and federally chartered “superfund” sites.
Obviously, neighborhoods that may be subject to “eminent domain” issues are also risky locations. Highway and property development always plays a concern.
Landlord, Neighbor, and Neighborhood Evaluation
No kidding, these are some very important concerns to address. Renters need to get acquainted with the landlord, the neighbors, and the neighborhood. Get to know the “issues” if any exist. If at all possible, try a “trial period” and see if you like the landlord, the neighbors, and neighborhood. If not, you can always move. A lease with an option may be a great answer.
In one case, a renter lived in a neighborhood riddled with drug use and users. The neighbors turned out to be nightmares and had bad attitudes. Needless to say, the renter did not buy the house.
Landlord & Rent-to-Own Issues
Time and time again, there are landlord and leasing issues. It’s important to address these issues BEFORE they become a problem.
- For sure, the landlord should show proof that the mortgage is being paid monthly. The renter should verify this is the case EVERY month. To be sure, there have been numerous cases where the landlord just doesn’t pay the mortgage.
- A single late payment could invalid the rent-to-own agreement. Negotiate grace periods in advance. It’s important. Otherwise, the down payment and any rent credits may be forfeit.
- In other cases, a portion of the rent may be applied towards the downpayment. This makes a great savings plan for down payment financing.
- Ultimately, the loan officer may require the landlord to be a real property company publicly listed on the internet. Rental history may not be honored by the lender if an individual is acting as a landlord.
Rent-to-Own: Seller Issues
- In the event of the untimely demise of the landlord, the contract would need to stipulate “what happens” next. Many times, the property can land in probate if there is no will. In the vast majority of situations, the heirs typically don’t want to be landlords. They want to sell and “cash-out” with the proceeds.
- Correspondingly, problems crop up when sellers may be facing a divorce, health issues, bankruptcy, legal issues or general money (or gambling) problems. These “scenarios” should be addressed upfront. Absolutely, our experience has seen multiple instances where renters are displaced due to these common occurrences.
- Finally, let’s weigh in on these matters. Landlords are in the business of making money. Of course, when it comes to housing, landlords like to make a profit premium. Similarly, this means charging an extra profit premium of $200 – $300 per month. As discussed earlier, this may mean an additional risk premium to offset breach in bad credit cases and can add $100 – $200 per month to the base rent (over and beyond principal, interest, taxes, and insurance – PITI). In the end, owning is usually cheaper than renting. Ideally, a rental calculator is ideal to use for rent-to-own.
A Word About Rental Rates
Finally, let’s weigh in on these matters. Landlords are in the business of making money. Of course, when it comes to housing, landlords like to make a profit premium. Similarly, this means charging an extra profit premium of $200 – $300 per month. As discussed earlier, this may mean an additional risk premium to offset breach in bad credit cases and can add $100 – $200 per month to the base rent (over and beyond principal, interest, taxes, and insurance – PITI). In the end, owning is usually cheaper than renting. Ideally, a rental calculator is ideal to use for rent-to-own.
Just be aware, if you are shopping “market rental rates” – these rates only apply to prime credit. Bad credit rental rates will almost always be higher.
Other Important Considerations: Pets & Things
To say nothing of the fact getting into a home with bad credit is downright challenging, dealing with pets is more so. Too, the more pets a renter has, the more challenging it is to find a house. In light of this, pets and bad credit can make the search even longer and more grueling. All in all, our advice is to limit the number of pets as much as possible.
As well, if you are considering a rent-to-own in a mobile home park, there may be some stipulations. The park has the right to run a credit and background check on all residents living in the park. The pet policy may also vary from “no dogs” to “small” pets to no aggressive breed dogs. Pet insurance is also highly recommended to cover liability issues.
More Considerations: Rent-to-Own
Additionally speaking, some parks require the resident to be the owner of the mobile home. Renting may not be allowed in the park. However, to get around this rule, some landlords make the renter a 1% owner of the mobile home and place them on the title. The ownership of the tenant is terminated once the lease ends.
By the same token, moving into a place where a pet formally resided may be an issue. It’s important to replace the carpeting and vacuum the space. By itself, pet dander is an allergen and may make the life of any occupant miserable. Clean the air vents too. Chances are air ducts are not clean. Also, if mold is a problem, check your options for removal.
No doubt, wood paneling may be problematic. Why? By and large, many children are allergic to various kinds of trees. Believe it or not, wood paneling can spark an asthma attack in a child (and it could be fatal). It is recommend painting or replacing the paneling for the best protection.
Where to Look for the Best Rent-to-Own Homes
Obviously, most homes which are already on the market for rent is a great option. Additionally, homes that are for sale “on the market” for 4 or more months tend to be open to rent-to-own. On the whole, “for sale by owner” homes may also work.
In general, a home that is a condo or townhouse also may work well for rent-to-own. On the whole, these homes lack a backyard and the feel of a single-family home. But, taken together, because they can be harder to unload, make great rent-to-own options. Restrictive covenants in the deed, or association rules, will need to be considered. This must be checked prior to entering into a rent-to-own contract (to avoid any legal violations).
Finally, one other thought. If you are thinking of rent-to-own on a single-family residence, the owner may need to notify the bank. In many cases, the mortgage or deed of trust may include verbiage about the property must remain an “owner-occupied” property.
Rent-to-Own: A Word About Possession
Surely, taking possession is a great question of timing. Unfortunately, sometimes the property may be under renovation and this can take some time. And, construction will need to be completed. Of course, a property may be occupied by the sellers or other occupants. When it comes down to it, they may need time to move.
Under such circumstances, it is wise to seek other temporary housing during these waiting periods.
Still Not Sure About Rent-to-Own?
On balance, it may be fair to say you may still not sure about a lease-purchase? In a word, a straight rental may be the way to along with the first right of refusal. All things considered (along with a “purchase fee”) you can have the owner give you the “first choice” as to whether or not to buy the property in question.
Secondly, a lease option may be the way to go. Being a renter, the lease would include the “option” to purchase the property subject to certain terms and conditions such as price.
A Final Thought
If you have good credit, the world is your paradise. However, if you have bad credit, getting to a point of having good credit is a no-brainer. Yes, in a tight housing market such as in 2019, good credit is more valuable than ever. Having bad credit is like living under an evil curse. It ALWAYS costs more money, more time, more effort and more wasted resources. ALWAYS! In the same way, bad credit is like living in a never-ending nightmare of misery and struggle. In the long run, it’s simply not worth it!
Remember, when you have bad credit looking for housing you are competing with good credit tenants looking for housing. Good credit always wins out time and time again (sometimes even if you have a high income).
Let’s face it. On the whole, many renters don’t want to risk their family being on the street. In some cases, people are so desperate they hide and try to live in storage units – all because of bad credit. In the final analysis, we’ve come across people who would pay $20,000 to end the craziness.
The Home Ownership Program is a small $500 investment. In fact, we’ve shown people how to increase their credit scores 100-150 points in 30 days. We aren’t promising this will happen for you because individual situations and results vary. It’s only a $100 minimum to start. You will be on your way to having better credit. We advise you every step of the way so you can OWN a home.
In a hurry to find a home or not? Getting your credit fixed should be your #1 priority – in order to finally end the madness.
Rent-to-Own: Get Started
Speak to a Home Sweet Home Representative
We can even refer you to a loan officer and real estate agent.
Want to chat? Call (636) 209-4663 (HOME)
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