If you have been struggling to buy a home due to bad credit or not having enough money saved up for a down payment, but you are responsibly managing debt and are committed to budgeting to own a home sooner than later, our rent to own program could be a good fit for you. 

Rent to own programs are designed to give hard working people who have yet to build enough credit to qualify for a mortgage from a lender or, you’ve been struggling to put a large enough down payment aside with the high cost of rent. 

After a potential rent to own home buyer has their application approved and the home that the rent to own home buyer will purchasing has been selected, the North Shore Properties Team will draft the terms and conditions of the rent to own contract that will clearly lay out all of the details for that particular rent to own agreement.

In the rent to own agreement terms, you will be offered the opportunity to:

• Make a downpayment based on an amount you have already saved for a home;
• Make monthly payments for a certain term (typically 1 to 5 years in length); and,
• Purchase the home at the end of the term for an agreed upon price.

What is important for all potential rent to own home buyers to understand is that the terms and conditions of every rent to own agreement is customized to the specific property and the specific financial situation of the potential rent to own homebuyer. For example, a potential rent to own client with a large down payment, but poor credit will likely have different terms than a potential rent to own client with good credit, but a very low down payment amount saved. The same is true for a potential rent to own homebuyer whose annual household income is over $120,000 but has saved a low down payment amount when compared to a potential rent to own homebuyer whose annual household income is $60,000 but has saved a large down payment amount.

Rent to own programs are designed to serve those eager to become homeowners, but do not qualify for traditional mortgage lending at the time. If you have not yet applied for a mortgage from a traditional lender, you should always attempt doing so before exploring the rent to own path.

Some key factors that influence how a typical rent to own agreement is crafted include:

• The larger the downpayment paid upfront, the lower the monthly payments will be throughout the term of the agreement; and,
• The shorter the term of the agreement, the lower the agreed upon purchase price will be.

Typically, the monthly payments that are structured in a rent to own agreement include the cost of the current mortgage on the property, property taxes, property insurance as well as an additional amount that will be held and used by the rent to own homebuyer as the down payment at the end of the rent to own term. 

The purchase price that the rent to own homebuyer is agreeing to typically factors in a conservative rate of appreciation on the property – typically 3% per year despite the average home price in Canada over the last 10 years rising an average of 6.8% per year.

You are likely looking into a rent to own program like ours because you have been turned down when you applied for a traditional mortgage due to:

• Bad credit;
• Low down payment amount;
• High monthly credit card, line of credit or loan payments; and/or,
• Low annual household income.

While a rent to own agreement is crafted to assist those potential homebuyers who were turned down by traditional banks for a mortgage, the goal of a rent to own agreement is to position you, the homebuyer, to be able to qualify for a traditional mortgage at the end of the rent to own agreement term.

If you are not committed to following our guidance to improve your credit, save up at least a 5% down payment by the end of the term, pay down bad debt (credit cards, loans, etc.) or have a reasonable plan to increase your annual household income, then a rent to own program is not for you.

Regardless of whether you choose to explore our rent to own program, or if you’re just looking for some tips to be homebuyer ready in 1 to 5 years, here are five (5) key action steps you can take to prepare yourself for a successful mortgage application submission.

1) Ensure you have at least one credit card and/or personal line of credit account open

One of the biggest factors holding potential homebuyers (just like you) back from purchasing a home is a lack of credit history or a poor credit history.

Having at least one (1) credit card open and if possible, one (1) personal line of credit account opened through your bank is critical to begin building a positive track record with credit.

2) Ensure your credit card balance(s) are paid down each month

Your credit score is heavily dependent on your borrowing history. A credit card can be a great tool to show you are responsible each and every month by paying the entire balance down to $0 by the due date.

Currently carrying a balance on your credit card?

You should be aggressively paying down the balance to the best of your ability to save on the high interest credit cards charge (18-22% per year!) and it shows that you can be responsible when borrowing money – a win for your credit history.

Saving up a down payment while carrying a balance owing to the credit card company or on a personal line of credit is not a good move. Use your down payment money to pay off your debt and then get back to saving up that down payment amount. You will save more money by paying less interest to the bank and you’ll be building a positive credit history at the same time.

3) Car Loans can be helpful for building your credit history if used wisely!

Have a car loan in your own name? That is actually helpful for building your credit score as long as you are following the terms of the loan by making your required payments on time.

Of course, paying off car loans prior to attempting to purchase a home is a wise move to reduce your monthly debt service (or regular monthly expenses) so that lenders can approve you for the mortgage amount necessary to purchase your first home.

4) Continuing to Add to your Down Payment Amount Each Month

Regardless of whether you have a large down payment saved up or you are just getting started, you should have a separate savings account opened with automatic transfers taking place each week or month to continue building your down payment.

Of course, paying down “bad” debt (credit cards and lines of credit) should take priority over saving for your down payment, however once your debt is taken care of, that money you were putting towards paying off credit cards and lines of credit should be now funnelled towards your down payment savings account.

Starting with as little as $100 per week can build your down payment account to over $5,000 in as little as a year!

5) Creating a Budget to Ensure You Are Able to Afford Owning Your Own Home

Struggling to pay down debt and save for a down payment?

Something has to change and creating a budget can help you determine where your hard earned money is going so you can decide what you might cut back on.

Maybe selling your car with a large car loan to get something less pricey can help?

Making more meals at home is another approach.

After you address your spending habits, you might consider determining whether your position at your current employer is going to bring in enough money each month to allow you to purchase a home. Can you take on a second job? Are there better paying opportunities that you are qualified or can easily become qualified for?

Thinking creatively is necessary if you are finding yourself struggling to get started on your home ownership journey.