Renting to own in New Jersey can be a great option for those Garden State residents who are ready for home ownership but just don’t quite have the finances in place to qualify for a mortgage right away. A rent-to-own situation will enable you to:
- Move into a home immediately
- Begin building equity in that home
- Spend a few years getting your finances in order so you can qualify for a mortgage.
While renting to own may be the perfect compromise for you (the ultimate "in-between" renting and owning) it's true that there are some things to be aware of when it comes to rent-to-own contracts. Before you sign any seller-financed or rent-to-own agreement, please be sure you have accomplished the following four actions.
1. Get a Home Inspection
Just because you are taking a different route to home ownership DOES NOT mean you should skip this crucial step. A home inspection will help you make sure the property in question is up to code and doesn’t have any glaring issues. It will also let you know ahead of time if there are repairs that will be needed soon.
If, for instance, the roof will likely need to be replaced in five years, that is good information to have now to help you plan for that (substantial) expense. A home inspection will alert you to any major issues, and you can request they be repaired by the owner before you move in. Be wary of a property that has a ton of issues: it may not be worth it in the long run if a property requires too many expensive repairs.
2. Request an Appraisal
Ask the owner for a copy of a recent, certified home appraisal. If they do not have one, it may be worth it to pay for one yourself. While you are not yet at the point of applying for a mortgage for the property, when that time comes you don't want to be blindsided. If, in the future, you attempt to purchase the property for more than its appraised value, a lender will not mortgage the home. An official appraisal can help you determine the real value of the property and help you negotiate a sales price when the time comes.
3. Make Sure You Will Qualify For a Loan Soon
Do not jump into a rent-to-own contract if you aren’t reasonably sure that you will be able to secure a mortgage to buy the home when the time comes. This means seriously committing to getting your finances in order, improving your credit score, paying down other debts, checking your credit report for black marks, and saving up for the costs of a down payment and closing fees. Some of your monthly rent will be able to go towards your down payment, but purchasing a home is still expensive and will require some savings.
4. Hire an Experienced NJ Real Estate Attorney to Review the Contract
Before you sign anything, it is a good idea to have an experienced real estate attorney look over the contract to ensure you are getting a good deal and that the contract protects your investment. They will also be able to point out places in the contract where you may want to negotiate terms with the seller. Veitengruber Law is an experienced New Jersey real estate law firm. We can review and discuss real estate contracts with you to ensure that the contract is fair and that you have the full protection of the law on your side.