Welcome back to Summit Buys Houses’ blog. Today we’re shifting gears a little bit to talk about a truly effective way for anyone who wants to buy a Dracut house, but isn’t quite ready to do so financially. There are many different ways to enter into home ownership and one that is often overlooked is the idea of renting to own a house in Dracut. When you’d like to buy a house in Dracut you could first move into the property, pay rent for some number of months and then choose to purchase that property out-right. Why would you want to do this? Read on for some more information.
What Does “Rent-to-Own” Mean?
Let’s start off by making sure you know exactly what “rent-to-own” means. A rent to own agreement may be appealing to you if you are not able to acquire a traditional bank mortgage at this point in your life. You could approach a landlord who is renting a Dracut house and inquire about the possibility of entering into a rent to own agreement with them. Essentially you are asking that if you pay a given amount of rent each month for say 36 months, that at the end of that time you could purchase that property from the landlord for an agreed upon price. And most importantly the agreement allows for some portion of the monthly rent you pay to be applied to the amount of a down payment you make at the time you buy your house.
Here is a really simple example: you find a great house in Dracut and ask the owner if you could enter into a rent to own agreement for 36 months. He is open to this idea and so you both agree. The monthly rent is $2,200. From that amount, the landlord has agreed that $200 dollars will be applied toward your down payment at the time of purchase. Assuming all goes well during the three years you live there, you would have accumulated $7,200 toward your down payment. Better than renting right? If you had rented that house over the same timeframe all you would have is a pile of canceled checks!
Advantage #1: The Neighborhood Counts
When you rent to own in Dracut almost all of your neighbors are likely to have a financial and emotional investment in the area more than an average renter would. Because they own homes they are they are invested in the neighborhood, they’re invested in their own property and in being good neighbors. This is good for you because properties that are kept up and show pride of ownership are obviously going to be more desirable and will appreciate in value over time. You gain from this appreciation because the property value will most likely increase while you’re renting in Dracut.
Advantage #2: You Have Time to Test the Waters
Because you can live in this house without a lifetime commitment, you have the ability to live in the area, and in the exact house that you intend to buy. Obviously, this gives you all kinds of information you’ll want! You’re less committed in the beginning and this may be appealing to many people looking to move into Dracut. Conceivably, you could walk away from the agreement if you’re not happy with the location and the property in every way possible. If you’ve ever had nightmare experiences with neighbors or other renters in the past—this is the best way to eliminate that from happening to you again. However, the downside is if you decide not to purchase the property at the end of your agreement, you may forsake your deposit and other funds that might have been applied towards your down payment.
Advantage #3: You’re Building Equity
You should have the expectation of positive financial growth within the next year or two if you are a renter looking forward to purchasing a Dracut property. Year on year properties in Dracut have appreciated in value anywhere from 3% a year up to 15% a year. So in contrast to paying rent, which gives you nothing but a pile of receipts, you in fact, have an interest in a property that is appreciating in value while you live there. If you’re truly committed to relocating to a certain Dracut neighborhood that might otherwise be out of your reach, this gives you a valuable leg up on home ownership.
Advantage #4: You Improve Your Credit Profile
With the rent to own opportunity in Dracut you may be able to overcome any negative credit profile you’ve had in the past. By making regular rental payments and showing the owner of the property that you’re reliable, you are gaining positive credit and an increasing share in the ownership of the property. Over the course of two or three years, you can reverse any type of negative credit scores that may make it hard to afford a Dracut home. With the time allowed on the contract you can always work towards the ultimate goal of having a good credit score.
The opportunity to use rent to own is great for first time Dracut house buyers and others who haven’t yet built any credit history but are aiming toward home ownership. Many times having no credit history can be nearly as detrimental to the dream of home ownership is having a bad credit history. The time you spend building this rent to own arrangement allows for you to build up your credit history strategically and improves your chances of having a solid score by the time your rent to own agreement is completed. Obviously with a credit history established during this time your chances of qualifying for a mortgage at the end of the rent to own contract increase dramatically.
Advantage #5: Money for a Down Payment
This is perhaps the biggest of all the rent to own advantages. Most rent to own agreements allow you as the renter to apply some portion of each month’s rent towards the down payment for the eventual purchase. Which means in a three-year agreement you’d have 36 opportunities to add to a down payment because some of each month’s rent would be applied towards the final purchase price. During the time you live in this Dracut house, you’ll also have a chance to build additional savings and move towards an even larger down payment on a traditional bank loan.
For people who are truly hoping to buy a Dracut house, but just don’t have all the resources they need to purchase a property right now, a rent to own agreement can be a great way to get you started. You do need some flexibility from the current landlord who is renting to get this agreement, but in the end, it can be a great way to build a down payment, improve your credit history and get a real-life idea of what living in Dracut would be like. All of us here at Summit Buys Houses are more than happy to provide you with even more ideas if you’re looking to buy your house in Dracut Massachusetts in the near future. Why not send us a message if you have any questions about the process or call (978) 254-3800 today to learn more?
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