Rent-to-buy concept being pursued by one lender
A major problem for many families who want to buy a home is the rapidly rising rent in residential housing. How can they save for a needed down payment when more than half of their income now must go for rent?
One solution, suggested by housing leaders, is to revive the old rent-to-own system, but adding a modern twist to it. It's now called the rent-to-buy concept. It was recently described in Realtor Magazine:
"For example, a report from Moody's Investors Service singles out a program called Home Partners of America, which helps potential buyers who can't purchase a home due to a lack of a down payment or credit problems.
"One of the unique aspects of the program - compared to other single-family rent-to-own programs - is that the buyers select a property they would like to purchase, and then Home Partners of America buys it (but it must meet the program's qualifications), and then sets up an agreement to rent the property to the would-be buyer. The end goal, however, is that Home Partners of America will eventually sell the property to the renter later on."
The report points out that the buyer-chosen properties are likely to be "higher quality and in more desirable locations (such as those with better school districts)" than properties that are purchased through foreclosure sales, according to Moody's report.
"Under the rent-to-own agreement and during the lease term, the tenant would be able to purchase the home at a preset price. The lease term generally runs between three to five years. The longer they wait to buy, the higher the price will go. The purchase price usually rises by 3.5 percent to 5 percent per year during the term of the lease."
Moody's report shows that the average value of properties under the program is $247,483.
Q. Are newly constructed homes increasing in size?
A. Yes, new homes are getting larger and include more amenities. And, of course, they have substantially higher price tags, according to a report from the National Association of Home Builders.
"The average size of a new home rose to about 2,720 square feet in 2015, up from 2,660 square feet in 2014, the National Association of Home Builders reports. Nearly half of the homes constructed last year had four or more bedrooms. A quarter of homes also had garages that would hold three or more vehicles. In 2015, the average price of a new-home rose to $351,000 - up $100,000 from 2009," NAHB reports.
"Some of the increase is due to builders catering more to the luxury market and moving away from building homes for first-time buyers."
Q. I see many tempting promotion spots on TV about reverse mortgages. Are they for real?
A. These spots are usually accurate but do not tell the full story. Here are a few points they don't mention:
The fees charged are very high. This includes the mortgage insurance costs.
The loan balance grows over time, thus reducing the amount that can be passed along in your inheritance.
Certain government assistance programs might be adversely affected due to the added income.
The reverse mortgage program is confusing and not well understood by most people. The availability of an independent counselor can be helpful.
Q. Are home sales still falling in California?
A. No, sales in that state are up, according to a news release from the California Association of Realtors. And trends that start in California are often followed by similar trends nationwide, falling short in November. Closed escrow sales of existing, single-family detached homes in California totaled a seasonally adjusted annualized rate of 405,530 units in December, according to information collected by CAR.
"The statewide sales figure represents what would be the total number of homes sold during 2015 if sales maintained the December pace throughout the year.
• Email Jim Woodard at storyjim@aol.com.
© 2016, Creators Syndicate