Rent To Own FAQs
QUALIFICATION
What are the minimum requirements to qualify for the rent-to-own program?
- Steady income from a job or self-employment (at least ~$65-$80K+ in the Alberta market )
- Initial deposit (Initial Option Consideration) equal to 2-5% of the purchase price of the home
- If your credit rating is poor, willingness to do the work to build your credit to a minimum of between 650 and 680.
Does applying for a rent-to-own program require a ‘hard’ credit check?
- There will be a ‘hard’ credit check after you’ve completed your application, had your initial consultation call, and provided the commitment fee and signed letter.
- We then finalise your application with the mortgage broker who will provide final approval on whether you are a good fit for a rent-to-own program. The mortgage broker will do the credit check after all of your application paperwork is received.
I have declared bankruptcy/consumer proposal, can I do a rent-to-own?
- Yes, our rent-to-own programs are structured for people who have credit issues including bankruptcy or consumer proposal.
I am going through a divorce and currently rebuilding my credit, would I be able to do a rent-to-own program?
- Yes, the rent-to-own program is structured to give you time to rebuild your credit and savings before you qualify to purchase the home.
I am going through a divorce and waiting for the marital home to be sold, would I be able to do a rent-to-own program?
- We recommend waiting until after the marital home is sold before considering a rent-to-own. This is because:
- the mortgage on that property remains your financial obligation. As long as your name remains on the mortgage, you are financially liable for the debt even if you no longer occupy or have anything to do with the property.
- This liability could impact your ability to qualify at the end of the rent-to-own program if the marital property has not been sold.
I am self-employed and finding it difficult to qualify to purchase, although we are more than capable of making payments. Only thing standing in our way is our taxes. Is rent to own a good option for us?
- Yes, a rent-to-own program is a good option for you because lending institutes need at least a couple of years of 'proof of business activity' and personal Notices Of Assessments (NOA) to determine what you can afford and whether you're credit worthy for that property. The rent-to-own program buys you time to establish these records while you're already in the house that you want and will purchase at the end of the program.
- Keep in mind, as a self-employed tenant buyer and depending on your specific circumstances, you may have to save to a 20% down payment during the rent-to-own program. This may require a significant commitment on your part to make those higher monthly credit (monthly option consideration) payments each month.
Can we use our RSP funds for the Initial Option Consideration deposit amount?
- This depends on whether your funds are in an RRSP or a TFSA.
- If you are using your RRSP funds for the initial deposit (Initial Option Consideration) be aware that you will be taxed on them when you withdraw them.
- If your funds are in a TFSA, you won’t be taxed on them.
- For the first time home buyers plan you won’t be able to use your RRSP funds until you actually purchase the home at the end of the rent-to-own program.
MARKETS AND PROPERTIES
Where do you do rent-to-own, i.e. which markets?
- We focus on the City of Edmonton and surrounding area, for example, St. Albert, Sherwood Park, and Beaumont markets.
- We may consider other markets if the neighbourhood/community is appropriate for rent-to-own, e.g. family friendly neighbourhoods with multiple employers (jobs!), access to public transportation, schools, shopping, etc.
Do you have an inventory of rent-to-own properties?
- Rent-to-own programs with an inventory of properties are called ‘property first’ rent-to-own.
- Our programs are structured as ‘tenant buyer first’ rent-to-own where we assess what you, the ‘tenant buyer’ rent-to-own applicant, can afford and what you need to do to qualify to purchase the property at the end of the program, e.g. increase savings, improve credit. We then assess what you can afford, and shop for the appropriate property for you.
What types of properties do you do rent-to-own with?
- The rent-to-own program is structured for single family homes in family friendly neighbourhoods with multiple employers (jobs!), access to public transportation, schools, shopping, etc.
Does the rent-to-own client (tenant buyer) get to pick the home?
- Yes, because our rent-to-own program is structured as a ‘tenant buyer first’ program you will choose the property that best fits your needs and financial situation.
- This will be based on what we assess what you, as the ‘tenant buyer’ rent-to-own applicant, can afford and what you need to do to qualify to purchase the property at the end of the program, e.g. increase savings, improve credit.
- The typical rent-to-own house is an older (more affordable) home with ‘good bones’ and may need a little cosmetic work.
Do you do rent-to-own with condominium and townhouse properties?
- Yes, we would consider a rent-to-own program on a freehold townhouse property.
- No, we don’t do rent-to-own on strata condominium and townhouse properties because:
- Monthly rental payments can increase during the rent-to-own program if the monthly condo/maintenance fees are increased during the length of the rent-to-own program.
- Additional, unexpected expenses could arise during the program if the condo board institutes a special assessment/levy (extra maintenance cost, in addition to monthly condo fees) during the rent-to-own program.
- These unexpected cost increases could impact your savings, e.g. for the down payment, and ability to qualify for a mortgage at the end of the program.
Do you do rent-to-own on acreages and farms?
- No, we don’t do rent-to-own on acreages and farms because:
- Acreage and farm properties are not typically located in types of communities where we do rent-to-own in, e.g. family friendly neighborhoods with multiple employers, access to public transportation, schools, shopping, etc.
- Additionally, acreages and farms are more challenging to obtain financing for both us to purchase the property at the start of the program and for you when you purchase the property at the end of the program.
Do you do rent-to-own for new build properties?
- No, we don’t do rent-to-own for new build properties or properties under construction because:
- There are too many unknown variables which could drive up the cost of the home and impact your ability to qualify to purchase the home at the end of the rent-to-own program.
- The typical rent-to-own house is an older (more affordable) home with ‘good bones’ and may need a little cosmetic work.
THE RENT TO OWN PROGRAM
How is our option consideration amount secured during the length of the rent-to-own program?
- Every time we collect your Initial and Monthly Option Consideration payments we will provide you with a receipt showing proof of having received your payments.
- It will also be important that you keep records of these payments , e.g. through bank statements, showing that you sent these payments and that there were no NSF payments during the rent-to-own program.
- These records will be provided to lenders as proof that you made all the required payments when you go to qualify for the mortgage at the end of the program.
What happens if we want to finish the program and purchase the property early?
- If you are able to qualify to purchase the property before the end of the rent-to-own program you can choose to do so.
- Details regarding your obligations during the program and the option to purchase early will be included in your Option to Purchase contract.
- Keep in mind, the price of the property will remain as agreed and signed on in the Option To Purchase agreement and you will cover any costs incurred by the current owner, e.g. mortgage penalty.
- The purchase price may be reduced depending on how soon after you started the program you’re looking at purchasing, the market, and the appraised value at the time.
What happens with our option consideration amount (savings toward down payment) if we don’t take the option to purchase at the end of the program?
- Due to the various costs to us to qualify you for the rent-to-own program, purchase and maintain the property and sell, rent or find a new tenant buyer for the rent-to-own program you will not get your full option consideration amount back if you do not complete the rent-to-own program.
- You can expect to receive ~5-10% of this amount refunded if you do not complete the program.
Can we use our RSP funds (as first time homebuyers) for the rent-to-own program?
- For the first time home buyers plan you won’t be able to use your RRSP funds until you actually purchase the home at the end of the rent-to-own program.
- If you have additional savings, use these instead of your RRSP funds, for the Initial Option Consideration.
- We then recommend you use your RSP funds to apply your RSP savings when you purchase at the end of the rent-to-own program. We don’t recommend withdrawing the funds until the end of the rent-to-own term and after we’ve received a lender approval commitment for the purchase.
Are My Services Right For You?
Complete the Rent-To-Own Questionnaire at the link below to help me assess whether a Rent-To-Own program would be good for you.