Marc Cox of Mioym is a real estate investment management professional with decades of experience. In the following article, Marc Cox discusses the benefits of Rent-to-Own properties, how these properties can rebuild poor credit, and explains the differences between lease-options and lease-purchase agreements.
Most homebuyers require a mortgage to finance the purchase of a new home. Qualified applicants have a great credit score and enough savings for a down payment. But without these two essentials, the traditional route to owning a home might not be possible.
Thankfully, Marc Cox of Mioym says there is another way to get on the property ladder — a rent-to-own agreement. With this contract, individuals rent for a pre-agreed time with the option to purchase the property before the lease runs out.
Individuals and families alike get many benefits when entering into rent-to-own agreements. But there are two different types of rent-to-own contracts that should be carefully considered by applicants beforehand.
Lease-Option Agreements VS Lease-Purchase Agreements
Marc Cox of Mount Vernon reports that experts will be quick to tell wannabe homebuyers that there is nothing straightforward about purchasing real estate, especially as a first-time buyer. And the same goes for rent-to-own contracts — two types with different obligations exist.
Lease-option agreements give renters the right, but not the contractual obligation, to buy the property once the lease ends. If they decide to move on and not purchase the home, the option part of the contract simply expires, allowing them to walk away from the house.
However, lease-purchase agreements are precisely that — renters are legally obliged to buy the property once the lease period is over explains Marc Cox of Mount Vernon.
There's no denying that legalese can be challenging for the average person. So, most financial advisors would suggest discussing the proposed contract with a qualified, experienced real estate attorney to avoid any mishaps down the road.
The 5 Benefits of Rent-to-Own Homes
Once individuals have established the contract they're signing, they get access to a wide range of benefits from their rent-to-own decision as explained below by Marc Cox of Mioym.
Rebuilding Bad Credit Scores
Bad credit is a major reason why people are denied a mortgage.
According to the
FICO Scoring System, a poor credit score is from 300 to 579, and a fair credit rating is between 580 and 669. Potential homebuyers falling into either of these categories are unlikely to get a mortgage by themselves.
Therefore, Marc Cox of Mioym reports that they can gain the breathing room they need to rebuild their credit through a rent-to-own contract — by the time their lease period is up, their credit score will likely rise beyond "fair," allowing them to secure a mortgage.
Achieving an improved credit rating while renting to own their property also helps mortgage seekers secure lower interest rates and more favorable terms.
Locking in a Price
Throughout the United States of America, housing prices are continuing to rise, and it doesn't appear to be halting anytime soon, making it challenging for potential homebuyers to get a house they love at a price they can afford.
This is where a rent-to-own agreement can save the day. People can live in the home they want while locking in the price and ensuring a portion of their rent goes toward the future purchase.
Previous years have seen many neighborhoods' prices skyrocket. So, locking in a price is more vital than ever before explains Marc Cox of Mount Vernon.
Trying Before Buying Method
Lease-option agreements allow residents to take stock of their home and the neighborhood while saving for a deposit.
It's not uncommon for people to purchase a home only to realize they don't like their neighbors or the property's location as much as they thought they would. Marc Cox of Mioym reports that lease-option agreements negate these concerns, providing an almost "try before buy" type of affair.
Nobody truly knows what living somewhere will be like without a trial run. In this sense, rent-to-own provides a unique opportunity that traditional homebuyers don't get.
Establishing Financial Credibility Without a Huge Down Payment
While in a lease-purchase agreement, a portion of the rent goes toward buying the house (i.e., rent credits). That way, Marc Cox of Mount Vernon says that individuals aren't forced to save thousands of dollars for a huge deposit, and they're more likely to get more attractive interest rates on their future mortgages.
Gaining the House's Appreciation
Finally, the pre-agreed purchase price is fixed and final. Thus, the seller can't increase the price as its market value rises during the contract.
Marc Cox of Mioym says that the buyers benefit from purchasing a home under the market value, and it gives them increased profits whenever they sell in the future.
