How our Rent-to-Own program works
Perhaps the most fulfilling part about what we do as a company is create homeowners. Individuals who might have thought home ownership wasn’t in their near horizon.
You see, the VAST majority of the market cannot walk into a bank branch today and get a home loan. And there’s a MYRIAD of reasons for that:
- New job
- Relocation for an existing job
- Newly divorced
- A foreclosure or bankruptcy that’s somewhere on their record
- Student Loans or even just a new car loan
- The list goes on and on and on….
BUT THE STEREOTYPICAL CANDIDATE tends to just be the family or person who’s are either self-employed or an independent contractor…… There’s over 15M independent contractors and 30M small businesses in the country. Unfortunately, banks usually won’t consider them for a loan simply because their tax return looks different than a middle manager at a widget company.
So the big question here is: “how is it that The Residential Buyer’s Rent-to-Own program helps people become homeowners?” Well, in terms of the mechanics of how this actually works, it’s pretty simple:
we’re going to agree on a purchase price today and within a calculated scope of time, you’re able to complete your purchase of the home.
Let's breakdown how this happens.
Before we breakdown the details of exactly how that happens, let’s first just note that, we’re obviously not going to approve everyone and anyone to move into our homes. We’re looking for candidates that need seasoning and perhaps credit enhancement to be approved for a traditional mortgage. Though those are not INsignificant things, we’re able to provide both of them to help the mortgage loan approval process.
It begins by taking candidates with limited, damaged or GREAT credit and putting them in our Mortgage-Ready-Plan. You see, credit can be repaired pretty quickly and it isn’t even the largest consideration for the bank.
We work with a phenomenal credit enhancement company, that’ll implement a strategy which can typically increase your score by 85 points in 6 months. Again, credit isn’t our biggest concern, and surprisingly, it actually isn’t even the bank’s.
What the bank needs to see and what we need confirm is whether you’ll be able to fundamentally afford the home… whether you’re a stable investment for the bank to make.
So how do we go about making someone a great investment for the bank? Well, using a disinterested third party, who verifies income, job history, and runs a full background check, they’re then able to run an underwriting simulation with the same software top banks utilize.
In that underwriting simulation, we:
- Confirm you have a qualifying debt-to-income ratio, defined under Dodd-Frank criteria.
- See a clear path to credit worthiness (or determine if you’ll need to use our credit enhancement program)
- Calculate a conservative date for bank approval for a mortgage on the home.
That’s right, we’re assembling a conservative date and set of conditions to follow for you to be able to get approved for a traditional loan.
Lastly, we ensure there’s an adequate amount of skin in the game from our Tenant Buyers. In other words, are you able to provide enough of a deposit to ensure you’re serious about the path to Homeownership? Or are you still better suited to continue being a renter for now?
Now… When you attain traditional financing, we credit your entire deposit to the purchase price of the home, but size of deposit is an important indicator that you’re capable of taking full responsibility over the home.
This, is where the magic begins: we’ve already completed the underwriting simulation, your deposit is paid and you’re now living in the home… your only job now is to follow through on the plan. This is what is commonly referred to as Seasoning.
- you continue making timely payments on your car;
- complete the credit enhancement program (if applicable)
- maybe you reach that 2year mark for residing in this area
- While you’re going through all of that, you’re simultaneously demonstrate for the bank through these lease payments that you CAN afford the mortgage.
ALL of the things we discover and review in the affordability analysis just require seasoning at this point.
One other pretty cool thing is that, on or before your Mortgage-Ready-Date, the company we use to provide your analysis will even connect you with the most competitive home loans once your Seasoning is complete.
We’ve got a pretty unique program that we’re definitely proud of. If you’d like to be considered for one our Rent-to-Own properties, make sure to join our mailing list so you can be updated whenever new properties become available.