To purchase a home in Canada requires a down payment that depends on the purchase price of the property. This ranges from 5 to 10 percent. This is making many people in various situations hard to purchase their own homes. With life these days filled with credit issues, debts, and smaller salaries, more people are being forced to rent. Luckily, there is an option to rent to own a property. Here are situations where rent to own is the best way to own your own home.
Why rent- to own in the following situations
Opting for a rent to own contract is a wonderful idea when looking forward to owning a home when facing various situations you are about to understand below. This is a viable solution when saving money for the down payment or improving your credit score. You get confidence that you will be ready to close the purchase when the lease period expires. It gives you a chance to pay on the total cost of the property monthly.
Having bad credit
Issues like divorce or health issues can make you end up with bad credit. It is possible to get a mortgage with bad credit but at a higher interest rate. The rule of thumb is to only get a mortgage with the ability to pay the monthly installments. Luckily, rent to own gives you a chance to own a home by giving you the appropriate time to repair your credit. This allows qualifying for the mortgage when the rent to own contract ends.
Lacking credit history
The credit score is essential when looking forward to buying a home in Canada. Lenders view your credit history as a reflection of your capacity to manage finances. However, students and new immigrants are less likely to have credit history without income. There is no chance of getting a mortgage approved without a credit history. The credit score determines whether your mortgage is approved or not. Opting for rent to own gives you a chance to establish your credit history to qualify for a mortgage at the end.
Lacking down payment for a traditional mortgage
As noticed earlier, the mandatory down payment in the country is about 5 percent and above the purchase price of the property. There is a chance of not having the appropriate time to save this amount. Knowing how to find rent to own home near me is a smart idea. this gives you time to save up for the down payment. This gives you a chance to qualify for a mortgage when the rent to own agreement expires. This is possible by opting for a rent to own with terms including mandatory monthly savings on the down payment.
When bankrupt
You obviously can’t buy a home outright after a bankruptcy. An effort is required towards getting discharge from bankruptcy and to work on repairing your credit. Fortunately, rent to own offers you an opportunity to fix your credit. At the end of the contract, you get a chance to own your own home while re-establishing your credit history.
When self-employed
Lenders see self-employed people as higher risk customers. So, they tighten rules and charge higher interest or larger minimum down payment to self-employment people. This makes owning a home quite hard and more expensive. Additionally, self-employed people have to fill out an application form, sign paperwork, and supporting documents. Keep in mind that you also need an appropriate credit score, down payment, and debt to income ratio to qualify for a mortgage.
Things get harder when you have to provide proof of income documents. Self-employed people have to submit financial statements, assessment notices, and two years of tax returns. You might also have to supply other relevant documents depending on your type of business. Fortunately, rent to own is a hassle-free process to own a home when self-employed.
Non-renewal of the mortgage on your current home
When falling behind your mortgage payments, you risk losing it. Luckily, rent to own is a trick to bail you out. You can find an investor to purchase the home and have it rented out to you. This is possible at a lower monthly payment than the mortgage. It is a great idea if the buyer got a higher interest rate or was getting out of a second mortgage. This strategy has worked for various homeowners, not in a position to catch up with payments to the bank directly.
In conclusion
Everyone desires to own a home. However, various situations might hinder you from realizing your dream. These might include being a new student, self-employed, have bad credit, lack of credit history, bankruptcy, or lack of appropriate payment for the traditional mortgage. Luckily, opting for a rent to own contract is a wonderful solution to own a home without those encumbrances.
