How to Rent With Option to Buy After Bankruptcy
Bankruptcy impacts your credit history and score in such a manner that obtaining a traditional home mortgage loan is challenging, even next to impossible. Nonetheless, even after a bankruptcy, you need a home. Simply because you likely are precluded from obtaining a traditional home mortgage loan in the aftermath of bankruptcy does not mean you have no other alternatives. One option to consider is rent with an option to buy after bankruptcy.
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Instructions
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Identify a seller willing to negotiate a rent with an option to buy agreement. There are benefits associated with a rent to own contract for a seller. For example, a property owner is able to sell real estate faster through a rent to own process because he does not need to rely exclusively on prospective buyers with access to traditional mortgage financing.
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Utilize the local newspaper and Internet services like Rent to Own as part of your efforts to locate home sellers interested in considering rent with option to buy contracts.
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Explain to the seller that you are at low risk for default on the agreement despite your bankruptcy. There are two points to make in this regard. First, most if not all of your debt was eliminated in the bankruptcy case, leaving you with more disposable income. Second, pursuant to the U.S. Bankruptcy Code you cannot file another bankruptcy for upwards to eight years.
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Negotiate the specific terms of the rent to own agreement. These provisions include the length of the lease term and the amount of rent paid monthly. Typically the contract provides for a balloon payment at a specific point in time in the future. The theory is that after the passage of time, you will be in a better position to obtain a home mortgage loan to pay off the seller.
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Execute a written, rent with option to buy contract. This type of real estate contract must be in writing and is not enforceable if it is merely an oral agreement between you and the other party.
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Tips & Warnings
Retaining the services of a real estate broker to assist you in finding a rent with option to buy opportunity is a wise decision. Many real estate brokers keep themselves apprised of these real estate options to assist clients unable to purchase homes with more traditional financing.
Ensure that you clearly understand the default provisions in a rent with option to buy contract. Typically the renter-buyer accumulates no equity whatsoever during the early stages of the contract. Therefore, if you abandon the contract, or otherwise default during that time period, the entire amount of money paid by you under the contract is lost.
