Everyone wants to have a home at some point in their life. Renting a home can be a good option for a while, but there are many benefits to owning a home. One of the biggest reasons people buy homes is to have more privacy and freedom to do what they want with their space. However, homes can be expensive, so many people choose to rent-to-own mobile homes. This option allows you to rent a mobile home for a period of time and then buy it once you’ve paid off the full amount.
It’s important to note that the landlord of a rent-to-own home is not the owner of the land the home sits on. The landlord is responsible for paying the rent for the land, but you should understand how that contract works because it could end up being an unexpected expense for you. This article will discuss the pros and cons of rent-to-own mobile homes, as well as some other things to consider before making a decision.
Why You Need Rent To Own Mobile Home
There are several reasons why one might consider rent to own mobile homes. These include:
1. Inability to make a large down payment
For many people, the cost of the down payment is a significant barrier to homeownership. For example, if an average home costs $360,000, a 5% down payment would be $18,000. This is a significant sum of money for many people, and it can prevent them from realizing their dream of homeownership.
With a rent-to-own arrangement, however, one can obtain a home and rent it for a period of time before purchasing it outright. Mobile homes are typically less expensive than traditional homes, so this can be an attractive option for those who are unable to make a large down payment.
2. Inability to obtain financing
Another common barrier to homeownership is credit. In the past, people with less-than-perfect credit were often able to obtain loans from banks to finance the purchase of their homes. However, after the housing bubble burst, banks have become more stringent in their lending standards.
As a result, if one does not have good credit, they may be unable to obtain a mortgage loan. In this case, rent-to-own mobile homes can be a viable option. By renting to own, one can build their credit score and demonstrate their ability to make timely payments. This can make them more attractive to lenders in the future, should they decide to purchase a home outright.
3. Difficulty saving money
Some people simply find it difficult to save money for a down payment on a home. If this is the case, rent-to-own mobile homes can be a helpful option. With this type of arrangement, some of one’s rental payments will be applied to the purchase price of the home. Over time, this can help one accumulate the necessary funds to purchase the home outright.
4. Rent-to-own mobile homes can help one build equity in their home
When one signs a rent-to-own mobile home contract, they are essentially locking in the purchase price of the home at that day’s value. This means that they are not subject to the volatility of the housing market, and they can be confident that they are getting a fair price for the home.
In addition, rent-to-own mobile homes can provide an opportunity to build equity in one’s home. After signing the contract, one can begin making improvements to the home with the goal of increasing its value. This can increase the equity one has in the home, and it can also make it easier to obtain a mortgage loan in the future.
5. Rent-to-own mobile homes can increase one’s choices
Buying a home in cash is not always an option, especially if one is looking for a home that meets all of their needs and wants. With a rent-to-own home, however, one can select any home they desire, as they will be able to pay for it in installments. This can give one a wider range of choices, and it can make it easier to find a home that is truly perfect for them.
Things to Consider When Renting to Own Mobile Home
Prior to considering a rent to own home, there are several considerations that must be made in order to make an informed decision. These considerations are as follows:
1. How do the monthly rent and final selling price relate?
If you choose to pursue a rent-to-own arrangement, you should be prepared to pay a higher monthly rent to the homeowner. This is because the extra rent that you pay will be applied toward the final selling price of the home. Over time, you will have the opportunity to purchase the home at a reduced price, as the extra money that you paid will have been applied toward the sales price. However, not all companies will accept this type of arrangement.
Therefore, it is important to know the final sales price of the home and the monthly rent payments that you will be required to make. Ideally, the rent should not be so high that it strains your budget. If you are rational, you will be able to get value for your hard-earned money.
2. Understand the agreement
Many people make the mistake of signing an agreement without reading it in its entirety. While it may be tedious to read through every word, it is important to understand the terms and conditions of the agreement so that you can make an informed decision. This is a legal document, and you will be held to the terms and conditions of the agreement until the end.
3. Consider the “Option Premium”
Once you and the homeowner have signed the contract, you will be required to pay an “option premium.” This is a fee that gives you the right to purchase the home once you have completed the rental period. It is important to note that this premium is not refundable. Even if you choose not to purchase the home after the rental period, you will not receive a refund. Therefore, it is important to be prepared to pay about 5% of the home’s final sales price as the option premium.
4. Check the local real estate market
This is another consideration that must be made when considering a rent-to-own home. Housing prices typically increase in value over time, but there are times when the market can be sluggish. It is important to have this information on hand so that you can make an informed decision.
For example, if the home that you are living in loses value in the coming years, will you still be able to afford the final sales price as agreed upon when you first signed the contract with the homeowner? These are important considerations that should not be overlooked.
5. Check the timelines
Before you begin the rent-to-own process, you and the homeowner will sign a contract that outlines the final sales price of the home and the length of time that you will be required to rent the home before you can purchase it. It is important to note the length of time that you will be required to rent the home so that you can weigh your options.
If you are required to rent the home for many years, you may actually end up paying more money in the long run. Therefore, it is important to be aware of this period so that you can make an informed decision. The monthly premiums should also be taken into consideration, as they will determine the length of time that you will need to rent the home before you can purchase it.
6. Consider legal guidance
In order to fully understand the contract, it is advisable to seek the counsel of a real estate attorney. This professional can help you understand all of the terms and conditions of the contract and can also help you address any concerns that you may have. This will help you make an informed decision.
How Can You Rent to Own a Mobile Home?
As you intend to rent a home today with the aim of owning it later, it is essential that you are aware of the entire structure. Here is what motivates each party to enter into a rent-to-own agreement:
1. First, decide you want to own a mobile home
This is where it all begins. You should first decide that you want to own a home. You can either buy in cash or take a mortgage. Perhaps the two options don’t work for you; you can now choose the rent-to-own option.
2. Find a rent to own landlord
If you do not have money to pay upfront, look for a homeowner who is willing to allow you to move into his or her house, pay rent and own later. Search for rent-to-own mobile homes near me.
3. Sign your rent-to-own agreement
This is the point where the future tenant and the landlord enter into a rental agreement. The contract stipulates the rental period, the amount of rent to be paid on a monthly basis and other details. It is important to read the contract carefully and make sure you understand all the terms and conditions before signing. If you are not familiar with the terms, you may want to consult with a real estate lawyer. The following are the different types of rental agreements available:
- Short-term lease: This type of rental agreement typically specifies a fixed monthly rent for the entire duration of the lease. If you know that you will be staying in a particular home or apartment for a short period of time, a short-term lease is the best option for you.
- Month-to-month lease: In this type of agreement, you agree to rent a particular house and pay rent on a monthly basis. If you choose this type of rental agreement, you should be aware that your rent may be subject to change at any time, depending on a variety of factors. This type of arrangement is ideal if you are unsure of how long you will be renting a particular rental unit.
- Subleasing: Also known as a sublet, this is the process of renting a property under the original lease that someone else holds. In this case, you will be working out the arrangements with the original tenant, rather than the landlord. If you are considering this type of rental agreement, you should make sure to obtain written consent from the landlord allowing you to reside in the house for the duration of the agreement you have made with the original leaseholder.
- One-way leases: In this type of rental agreement, the landlord typically charges a termination fee or waives the security deposit if you choose to move out before the end of the lease term.
- Fixed-term leases: These are rental agreements for a specified period of time, typically one year. During this period, the landlord cannot increase the rent or change the rules of the tenancy. On the other hand, tenants are expected to adhere to the terms and conditions of the lease for the full term or face penalties.
4. Pay for the option premium
In addition to executing the option agreement, the buyer must pay an up-front cash payment known as the option premium. This payment is non-refundable, even if the buyer does not exercise the option to purchase the property in the future. The option premium is typically negotiated between the buyer and the seller, and is typically between 2% and 7% of the purchase price. However, the specific amount of the option premium may vary depending on a number of factors, including the market conditions, the property type, and the terms of the option agreement.
Advantage and Disadvantage of Rent-To-Own Mobile Homes
- Advantage:
- It is ideal if you have bad credit.
- Good option if you do not have all the money to buy a home upfront
- Allows you to have an opportunity to inspect and even live in the home that you ever wanted to buy before actually deciding to buy it or not.
- No price increment in case the house prices rise in the future. This way, you will save more.
- Reduced costs of moving in the future since you will live in a home that you will eventually buy after some years.
- It can help you build equity in the long run.
- Disadvantage:
- In case you do not buy the home, you might lose all the extra money you had paid.
- Less control as you do not own the property yet.
What Happens If The Manufactured Home Park Terminates My Tenancy, During My Rent-to-own Contract?
In the event that your tenancy is terminated, the park must reimburse you for all rent-to-own payments that you have made during the term of the contract. If the park fails to reimburse you for these payments and you are evicted, you should seek redress from the court. The court may award you damages, including the amount of rent-to-own payments that the park has failed to reimburse you for.
Buying vs. Rent to Own Mobile Homes
Buying a home is expensive, but if you have all the resources needed, it is better that you buy a home upfront as you will save more. Although renting might seem to be a good idea, you might spend more compared to the price of buying in cash.
Also, buying protects you from facing unpredictable rent increase in the future. However, if you do not have all the monies to buy a home, you can consider renting one and with an aim of owning it in the future. This option is also safe and convenient. After all, the monthly premiums might be a bit pocket-friendly to you.
FAQs
Who is responsible for repairing a rent-to-own manufactured mobile home?
If you are renting a manufactured home, you will find that the landlord is responsible for making repairs, unless the damage is attributable to you. This is because you are not yet a homeowner until you have satisfied all of the obligations in the rental agreement.
Is the manufactured home park required to offer me a lease?
Yes. Once you have entered into a rent-to-own contract, the park will offer you a lease for the lot on which the home is situated. If the term of the rent-to-own contract exceeds the term of the initial lease for the lot, the park should offer you renewal leases.
Can the manufactured home park increase my rent?
Yes. However, the rent increase should not exceed 3% of the current rent. It is worth noting that some parks routinely increase the rent by more than 3%. If this occurs, the park must demonstrate that the rent increase is justified by an increase in operational expenses or an increase in taxes.
Can the manufactured home park charge me late fees?
It is true that late fees may be charged by the park, but there are limits on how much they can charge. For instance, no late fees can be charged on payments received by the park within 10 days of the due date. However, if a payment is made more than 10 days after the due date, a late fee is typically charged. In this case, the late fee may not exceed 3% of the original payment amount.
Do I need to pay anything to get the title transferred to me at the end of the contract?
No. It is important to note that the rent-to-own contract does not require any payment for the transfer of the title into your name. Additionally, once the contract has been completed and all necessary payments have been made, there should be no liens, encumbrances, or interests that would hinder your enjoyment of the home.
Final Thoughts
As discussed above, it is possible to become a homeowner even if you do not have the entire purchase price. Rent-to-own mobile homes have proven to be a viable option for individuals who are unable to raise the down payment required to purchase a traditional home. If you meet the terms of your agreement and make all of the necessary payments on time, you will eventually own the home that you have been leasing. Rent-to-own mobile homes are an excellent way to make your dream of homeownership a reality.