Can a home buyer really buy a home without having their credit checked, without having to go through a bank and applying for a home loan?
The short answer is: Yes, if they know what they're doing.
Buying a home, "Rent to Own" is not only possible, but it can be a very smart move for someone who hates the idea of throwing their hard-earned money away every month in rent payments.
Here are a few reasons why a renter would want to buy, "Rent-to-Own" in the first place:
But don't the above reasons why a renter would want to buy a home spell disaster for the home owners they will ultimately buy from?
Maybe. Maybe not.
There is no cookie cutter answer to this question, and each buyer qualification of a each buyer must be performed on a per case basis (manual underwriting).
For example, renters who've filed a Chapter 7 Bankruptcy 3 years ago, may only need 1 more year to go before they can qualify for a home loan.
Home loan qualification requirements change all of the time, and banks come out with new loan products regularly, so a renter who does not qualify this month, or this year, could very qualify next month, or the beginning of next year due to a new loan product that comes out on the market.
In the case of the renter who had filed a Chapter 7 Bankruptcy 3 years ago, a 2 year lease Option might be a good fit, assuming they truly only need one more year to qualify, and just want 1 more year for safety.
During those two years (the "lease term"), the renter-buyer can work on fixing their credit. save for their down payment, build equity with a home they do not yet own (but legally control with the Option rights), and if need-be, they can gain more time on their job if that too was a loan requirement they do not meet from the start.
But What's In It for the Home Seller?
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While most home sellers are not at all excited about the fact that their potential renter-buyer has had a bankruptcy in the past 3 years, I often remind them of the following:
When renter-buyers put anywhere from 3-5% down in order to buy their Option rights, they've got skin in the game for sure. Far more "skin" than a traditional renter does.
Oh, and by the way, there are NO guarantees that your traditional renter is going to always pay on time, even with a perfect FICO score.
How do I know?
Because before I filed for Chapter 7 bankruptcy 10 years ago, I had close to a 800 FICO score.
I lost a very successful real estate business after I invested in a TV commercial that flopped.
The point is, if I was trying to rent a home at that time (which I didn't do), and the home owner went solely off of my FICO score, they would not have manually underwritten my rental application, and thus, would not have seen that I was about to go under - big time.
FICO scores can't tell you what lies beneath the iceberg of your financial picture.
Again, the moral of the story here is that a renter-buyer can buy a home without a credit check as long as:
There down payment (the Option fee) now replaces their FICO scores.
Want to learn how to structure what is by far the easiest offer for any home seller willing to take terms to say, "YES!" to? Click here.
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