Tenant Buyer FAQ

Q: What is a Tenant-Buyer?

It is a family that leases a property before purchasing the property

Q: What is the difference between Rent-to-own and Lease Option?

If you went to rent a car you would go to Avis or Hertz and abuse the car for the time you had it – thinking “This is a rental!” If went to lease a car you would go to a dealership and treat it as if it were your own thinking – “This great car will be mine soon!”

 

Q: What is the Lease Option Process?

  1. Visit the home or homes you are interested in to decide whether or not it is for YOU!
  2. Submit full application if haven’t already. Even if you haven’t found the right home for you yet, you can still get your application going so you’ll be ready to go when you do decide on a home.
  3. Submit a recent credit report with your 3 credit scores. Let us know if you need help pulling your credit.
  4. Need Credit Repair? We know it can be overwhelming to decide which company to go with that’s affordable AND legitimate. We’ve done our research and refer our clients to Clean Slate Credit Services. Their initial consult is FREE! and most times we can get your credit repair expense counted as part of your down payment!
  5. Submit funds in escrow (full down payment and first full month’s rent will be due prior to move-in and can be submitted at any point during this process).
  6. We handle all of the rest

Q: What are the benefits to becoming a tenant-buyer as opposed to just waiting until I qualify for a loan to purchase a home outright?

There are numerous benefits to becoming a tenant buyer

  • You can move in the house you want to buy NOW knowing that the money you’ve put down is going towards the purchase of the home.
  • Typically when you get a bank approval for a loan, it comes with an expiration date. That puts a lot of pressure on you to find the right home in a short amount of time. With rent-to-own you can enjoy the home you want to buy NOW and take your time repairing your credit, building a down payment and/or shopping around for the right loan for you.
  • Most home buyers don’t have the luxury of being able to shop around for the best loan. Since you’re already living in the home you want to buy, you can make the banks work for YOU in offering the best terms because they know you are shopping around.

Q: What is the qualification process to be accepted as a tenant-buyer?

The qualification process is quite simple…from your application we will verify rental history, employment/income and background/public records. Plus you’ll do a credit consult with our 3rd party specialist to make sure we’re setting you up with the right terms which will include a check to make sure the price points of the home are affordable so that you are set up to win with your upcoming home loan.

* HOT TIPS * to get your application processed quicker:

  • Fax or email a copy of your pay stubs and/or proof of all household income (this includes child support, disability and any other household income).
  • Be sure to also submit a signed VOR (Verification of Rent) Release Form.
  • Submit your credit report and scores (or have us pull it) as quickly as possible! It’s ok that you need to work on your credit! Your credit consult is FREE and will help determine a plan for you to ultimately purchase the home (Please note, if you need your credit pulled by us, there will be a nominal fee to cover the cost of the credit pull).
  • Get whatever funds you have available into the Third Party Escrow Account. No one can do anything with those funds until YOU sign off on it. If you don’t get selected for the home or if you change your mind, you get your money back 100% right away.

Q: I have challenged credit. How good does one’s credit score have to be to qualify for your lease-option program?

It’s not so much the score that we look at…we’ve seen scores around 500 (even below) be restored to the mid-600′s in less than 9 months…even with folks who have bankruptcy and foreclosures on their records! Credit is totally repairable if one is committed to a solid plan of action. Restoring one’s credit doesn’t happen over night which is why renting-to-own is perfect for such a situation.

What we look at with your credit situation is: what needs to happen/be disputed/be paid off/etc to get the score higher and to level? Some repairs/corrections can happen pretty quickly. We’ve had clients restore their credit in a matter of 3 months! Other situations will take some time.

We have an EXCELLENT credit repair company we can refer you to if you’re not already working with someone. They do FREE consultations and can get started on your credit repair right away. Over 90% of our clients can repair their credit within 12 months or less! We get you connected to a Seller with an 18 month contract, so that’s plenty of time. ***BONUS!*** Most times, we’re even able to get your credit repair expense to count as part of your down payment!

Some of our Sellers will require that you be enrolled actively in a credit repair program throughout the term of your rent-to-own agreement. We’ve done TONS of research, tried out several companies and one by far stands out among the rest in terms of RESULTS and AFFORDABILITY. Please check out why we refer our clients to Clean Slate Credit Services by clicking HERE.

There are some clients who need more than 18 months to repair their credit…let’s say they had a bankruptcy last year and need to wait at least 2 years with a solid payment/new credit history before they are lendable again. No problem! We make sure we match them up with a home whose property owner is willing to extend or start off with a longer term. Again, the beauty of how flexible and customizable a rent-to-own transaction can be.

Q: What is the average down payment required?

Every Property Owner is different and every property is different. Typically somewhere between 3.5-7% of the purchase price is what the seller is seeking for a down payment (sometimes referred to as an “Option Fee”). We have found that the higher the down payment (especially if it’s MORE than the minimum), the more flexible our sellers will typically be on the terms. Plus it’s easier and quicker to get qualified for a loan as 100% of your down payment goes towards the purchase price when you buy your new home.

In order to be competitive with other applicants, we encourage applicants to save up at least $5,000 (plus first full month’s rent) at a MINIMUM for city properties and $7,500 (plus first full month’s rent) for county properties. Again, it’s not that the Seller won’t work with you for less. It just likely though that there’s another applicant who is at least offering those amounts.

Q: Can I use my 401k funds for my down payment?

Yes! Many clients have taken out loans from their 401k plans for their down payment. Some retirement funds will also allow you to take a distribution without penalty, too, because you’ll be able to demonstrate that these funds are going towards a home that you intend to purchase. Also, for applicants who have recently changed jobs or are about to change jobs, you can elect to take a full or partial cash out distribution rather than rolling over the funds to the new company. Whatever the situation, we definitely recommend consulting with your administrator first to find out all the eligibility and any other requirements that may be involved.

Q: What happens if my application is turned down?

First thing to clarify…”turned down” doesn’t necessarily mean that you are not approved for our program overall. To date, the only applicants who have not been approved for the program were those who were not honest on their application. Others have been “turned down” because the Seller had to choose between multiple APPROVED applicants because of course, only one family can get the home. In that situation where an applicant is not selected, they have the choice to get their escrow funds back immediately or the funds can remain in escrow until another home becomes available. When that happens, the application is already processed and nothing further is needed. You just give us the word and we’ll present your application to the new home’s Seller and typically they are delighted to have a qualified applicant ready to go!

Q: Is my down payment/option fee applied towards the purchase price?

Yes! 100% of the amount that is used for the down payment/option fee goes towards the house!!! This is dependent on that you have made all of your rent payments on time.

Q: When it comes to a move in date, do you recommend moving in on the 1st only?

No, not necessarily. You can move mid-month or any day that best suits you. You submit the first FULL month’s rent prior to move in, but your next monthly payment due will be a prorated amount for whatever days you actually occupied the property in that initial month. We have had some clients save as much as $1000 but not moving at the end of the month.

Q: Am I financially responsible for repairs during the rental period?

For the first 30 days anything and everything materially affecting the livability of the property is 100% on the Property owner. After that, the home warranty in place typically covers everything else…you just pay the deductible (typically $50-$60 per claim). With a property that has been completely renovated (where everything is brand new) sometimes the Seller opts not to have a home warranty because everything is covered by the Manufacturer’s Warranty.

Q: Can I have the house inspected by someone before making a decision?

Absolutely. Keep in mind, all of our Property Owners have to obtain a rental license and pass any required property inspections for that license or registration which may or may not include a lead inspection. But you are welcome to complete your own for your own information’s sake. Just let us know when you’d like to conduct the inspection and we’ll make sure the property is accessible.

Q: Is it okay to run my business out of the house?

Generally…yes, but it is a case by case basis. The businesses that get turned down typically are day care businesses due to the liability incurred for the property owner.

Q: I’ve never purchased a home before. When I’m ready with my loan to finally purchase the home, what will my closing costs be when it is time to purchase the property?

Most people don’t know all that’s involved in purchasing a home…lenders, appraisers, inspectors, surveyors, title researchers, and of course the attorney are required to get involved and of course have to be paid. Thankfully, most of them don’t need to be paid up front…they get paid at closing…hence “closing costs”. Closing is when the purchase is made official and title is transferred from the Property Owner to Tenant-Buyer and You get the deed to your new home. For anyone purchasing a home in Arizona, whether through rent-to-own or not, a rough estimate of closing costs would be:

  • 3% for transfer taxes based on the contract price (if this is your first time owning a home, the county/state gives you a credit off of these standard fees)
  • + 1% of contract price for title work fees/attorney fees (if you use our recommended Title Company you’ll get our discounted rates because we do so much business with them)
  • + Whatever your loan company adds to this to secure the loan. This can range from 0% to about 4%.

Therefore, expect to pay at least 2.5% of the contract price and then be prepared for any additional costs in getting the loan. We have no idea what the loan fees will be, as they are totally dependent upon your lender. However, it is possible to negotiate these fees down. 

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