Ron here, from Fraser Valley Rent 2 Own.
I’m not sure whether you saw this story in the local paper, but the following article was recently released to all the newspapers in the Fraser Valley. I wanted to make sure you had a chance to read the article, so I am pasting it into this email.
Rent-to-own program bridges gap for would-be homeowners
With the tougher mortgage rules implemented last year, would-be homeowners are finding new ways to get into their first homes. And programs are springing up to help them.
The new rules were implemented to protect people from getting into debt they can’t afford. But those rules and bank policies on mortgage eligibility have made it difficult for some people who could otherwise afford a mortgage to actually qualify for one. The self-employed, new immigrants who do not yet have sufficient credit within this country, and those who need time to re-establish broken credit (possibly through ignorance or no fault of their own) often do not qualify under lending standards.
Part of the problem is that the policies need to be applied consistently. Lenders can’t be creative in dealing with individual circumstances.
Enter Rent-to-own programs. These programs have been around for some time. Typically, investors with an eye for a profit have scooped up under-priced properties, then found willing tenants, who enter into lease-option contracts to eventually buy the homes at appreciated prices. The tenants pay an up-front fee to secure the option at the end of the lease period, as well as an inflated rent during that period, with a portion of the rent set aside as credit towards the eventual purchase. At the end of the lease-option, the option fee and rent credits together form the down payment, which is then sufficient to gain a mortgage, and the title is transferred to the option-holder.
If the option holder is unable to close at the end of the term, for whatever reason, they forfeit their option fee and rent credits. These programs have had varying degrees of success.
New programs are tweaking the concept to increase the chances of success. Fraser Valley Rent 2 Own is one such program serving this area. The main difference is what owner Ron Geddert calls, “the client-first” approach (as opposed to “the property-first” approach). With this approach, the client is linked up with the program’s realtor to find the home that suits them rather than being put into a home that suits the investor; the program itself carries no inventory of homes. “The pride of potential home ownership is greater when they have chosen their own home,” says Geddert, “and so the likelihood of success at the end of the lease-option period is greatly increased.”
Another integral part of the program is the inclusion of credit counselling throughout. The clients agree to quarterly sessions to review their efforts to reach adequate credit scores at the end of the term (usually two years). “We want the client to succeed,” says Geddert, “We don’t want to end up owning the house. If this isn’t win-win-win for all, we don’t want to get into the contract.”
Of course, the key is a good qualifying process. “While we do rigorous pre-qualification of clients to expect a successful conclusion, our standards can be more flexible than the lending institutions. Our concern is, ‘Can we, working with a motivated client, get them to lending institution standards within the option period?’ If so, we can work with them.
“We can’t help everyone. But if the client is within shouting distance of qualifying, we can get them into their dream home several years earlier than what might otherwise be possible. And some, without the motivation of a program like ours, might never otherwise bridge that gap.” For more details of the Fraser Valley Rent 2 Own program, please visit: www.FVrent2own.com
For a quick start application form click here
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