My fiance and I have some of the worst credit due to the poor economy. All of our credit cards are maxed and well over their limits due to late fees and such. Most of them are several months to year past due and it seems like no matter how hard we try to save money to pay them off, something always comes up that we need THAT money for.
We are looking to get married in two years and want to start a family of our own, but don’t want to be renting SOMEONE ELSE’S home. We would like to buy our own, but obviously with our credit the way it is, we cannot afford to go through a Realtor nor will anyone give us a home loan, much less a home loan for 100% financing.
So my question is, what kind of purchase option would be more beneficial for our situation? Should we do a Rent-to-Own aka Lease Purchase option? Or should we try and find a seller who is willing to carry the loan for us with a small (less than 3k) down payment with an affordable monthly payment (1k a month or less)?
I would also like to know, if the Lease Purchase option is the best way to go, what all is involved in that? Who would be the best company to use for the Los Angeles, CA area?
If neither of these options are the best for us and there is a better way where we can still buy a home while living in it now, please let me know all of the aspects for that option and who the best people to contact would be.
Serious answers only please! Much appreciated!
What Would Be More Beneficial For My Situation; A Lease-to-own Or Seller Financing?
July 23rd, 2010
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First off you shouldn’t blame your bad credit on the economy. Bad credit comes from being irresponsible and ignorant. However, I think your best option is to just rent a home, not rent-to-own. You may become dissatisfied with the home your living in and then decide you don’t want to live there any longer. And may contractually be obligated to stay. Plus can you imagine how long a time it would take to finally own that home. Most people live in their home for 5-7 years.
Good luck. -
I had the same query a while ago. Save some time and see here – http://www.e-loansresources.tk
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Wow. This is a tough one.
First of all, you just HAVE to get those credit cards down. If you don’t, you will find yourself in an impossible situation, where you cannot even pay enough on them to pay off the *increase* in the interest added every month. You might already be in that situation. I don’t know what you keep finding to buy, but unless it is medical expenses, it is not as important as wiping out the credit balances. I’ll get back to this point in a minute, because I want to address your main question.
If you can get seller financing, that’s definitely the way to go. With lease-purchase (sometimes called contract for deed), you don’t own anything until you are 100 percent paid up. If you miss one payment, you can lose your entire purchase. They just throw you out, even if you have been paying on time for 10 years. Given your problems with credit, can you really trust yourselves never to miss a payment? With seller financing, you get the deed, just as with any other sale, and if you build up some equity, you can sell the house if things get tough.
Of course, even seller financing is credit, so it may not be possible for you to get seller financing unless you can put your accounts in order. But if you can find someone willing to offer it, that’s what you should do. The percentage of people who lose their homes in a lease-purchase arrangement is phenomenally high. Try to stay away from that.
However, I think you should seriously consider downsizing your plans for now. Many, many couples start out their married lives in an apartment. That’s certainly what I did. We lived in a smaller apartment than we could have afforded, because we wanted to put every penny into a down payment on a house. It wasn’t fun, but it worked out better in the end. We rented for about a year and a half before we pulled everything together to get a mortgage. I think you should give that very serious thought. Marriage is tough enough without money issues, and you already have a ton of those. You don’t need to add the worry of whether you can make the house payment this month.
Now, let’s look again at those credit cards. If most of your cards are past due, you need to talk with a NON PROFIT credit counseling service. Stay far, far away from any “credit repair” business that charges a fee. 100 percent of them are rip-offs, and almost 100 percent are complete scams. But there are non-profit credit counseling services in almost every county in the country, and certainly in every large city. Sometimes they are government funded, but a lot of them are run by respectable charities and other agencies (the Urban League runs a lot of them in my region, for example). They can work out payment arrangements with your creditors that will get your payments down to a level you can manage. They may be able to negotiate a reduction in the interest rates, or even a reduction in the total outstanding amount. And once there is a credit counselor standing between the card companies and you, some of the worst possibilities–like getting sued by the card companies–go way, way down. I don’t know how deep you are in, but it sounds pretty bad. Try the counseling service route before you wind up in bankruptcy or worse. (Yes, there is worse.)
To sum up, if you can get seller financing, go for it. If not, rent an apartment. Stay away from rent-to-own, which takes more discipline than most people can muster, and that seems to include you. Meanwhile, work out an arrangement to pay off your debts or get them reduced. Do that one immediately. I wish you well. With luck and hard work, you will look back at this time and say, “Whew. We had a close call, but we are doing a lot better now.” Good luck!!