For most, securing manufactured housing means either renting or purchasing a manufactured home. However, there is a caveat, or rather a third option to consider — rent-to-own.
Choosing rent-to-own mobile homes is a great way to become the homeowner you have always dreamt of being, without jumping the gun financially.
Rent-to-Own Mobile Homes
If you are considering whether or not to rent or purchase a mobile home, then now is the perfect time to see if renting with the option to buy is the better route for you and your family.
What are Rent-to-Own Mobile Homes?
Rent-to-own residences are mobile homes that are currently for rent. However, a rent-to-own lease includes an option for purchase or a possible requirement that you must buy the property after a certain period of time has passed.
That said, the rent paid typically covers the current lease, and can be applied to your future down payment when you purchase the manufactured home.
Usually, the rent-to-own option is a great way to build your credit up (credit score) while simultaneously saving up for a down payment. This is extremely beneficial for most people that simply cannot afford the average down payment, of which can often be as high as 5-20 percent of the price.
Having a good credit score is really quite important in this case.
How to Find One
Finding rent-to-own mobile homes is not so easy. The truth is that rent-to-own listings are not that common.
The reason these particular listings are so hard to find is that they typically only occur under a certain set of circumstances. In other words, if you have stumbled upon rent-to-own manufactured homes for sale that you are interested in, then you need to act fast.
Generally, if mobile homes have been for sale/on the market for quite some time, then the owner may choose to list them as rent-to-own or vice versa (an interested party may have noticed that a manufactured home for sale has been on the market for a while and, thus, decide to approach the owner about a rent-to-own agreement).
Then again, if a long-term tenant has expressed interest in purchasing the property, then the owner may agree to sell it as a rent-to-own.
How Does it All Work?
In order to get the ball rolling with rent-to-own manufactured homes, there are several things that must take place.
Of course, a formal agreement needs to be made between the owner and the renter/buyer. Moreover, terms, fees, a price, and other pertinent details need to be figured out as well.
Once all of the necessary paperwork has been handled, then, and only then, can the rent-to-own journey begin.
There are two types of legal agreements/contracts that can be drawn up and signed by both parties, in terms of the rent-to-own agreement.
Lease with Option to Purchase
The first agreement is a lease agreement with an option to purchase. This particular contract essentially gives the tenant/renter the right to buy the manufactured housing unit, but not the obligation. Thus, at the end of the lease agreement, if you decide you do not want to purchase the manufactured home, then you can simply walk away.
Note, you will lose out on any additional monies put towards the future down payment, so make sure to read the terms.
Lease with Purchase Agreement
The other contract is called a lease agreement with a purchase agreement. Here, you are legally obligated to purchase the mobile home or manufactured home as you signed with the rent-to-own contract.
Consequently, with this rent-to-own agreement contract, you should ensure that a third-party inspection occurs, so there are no surprises down the road.
You should also consider getting a possible pre-approval for a mortgage, just to make sure that you can qualify for one at the end of the agreed-upon term.
Set Purchase Price
In addition to a formal agreement, you should be aware of the purchase price upfront of the rent-to-own mobile home.
Typically, the landlord or the real estate owner of manufactured homes for sale will set the price, and you can negotiate as you see fit.
If you want to consult a real estate agent on a rent-to-own manufactured housing unit, you will likely have some difficulty finding an agent that deals with such real estate transactions. Therefore, you should do a little research of your own to figure out what the mobile homes or manufactured homes are going for in the area.
Tip: schedule your third-party inspection sooner rather than later, so you can reference it when negotiating the final price.
With this kind of real estate transaction, there is also an option fee. This fee is negotiable, but typically ranges from 1 to 5 percent, and is a one-time, non-refundable fee.
This particular cost or fee allows you to purchase the manufactured housing unit for the agreed-upon price. The option fee is normally added onto the manufactured housing purchase, so you will not have to come up with any additional monies right away.
The standard rental term or period is three years, in most situations. However, as the renter or tenant, you can usually decide how long the rental portion of the program will be.
Here, the point is to give yourself enough time to get your finances in order so that you can qualify for a mortgage or financing.
Since this is a rent-to-own situation, maintenance roles will need to be defined.
As you may be aware, when renting a manufactured home, most maintenance issues are not the tenant’s responsibility, whereas when you purchase, then the upkeep falls to you.
Unsurprisingly, this can make for a sticky situation when you are renting-to-own. Thus, you and the owner must come to some form of an agreement as to who will ultimately be responsible for the necessary repairs and upkeep of your new home.
With a mobile home, however, the actual owner is still responsible for maintenance.
Monthly Payment Covers More than Rent
Your rent-to-own agreement should also clearly lay out what, or rather, how much of your monthly rent goes toward your new home down payment savings.
Often, a rent-to-own tenant will pay above-market rent so that at least 25 to 30 percent of the monies paid goes toward the down payment fund.
That said, the money that is being set aside from your rent is rarely enough to cover a full down payment; thus, you should be saving up in addition to this.
If you would prefer to negotiate for a higher percentage, that is up to you, but most people tend to stick to the 25 to 30 percent.
Applying for a Mortgage
Last, but not least, once the rental period or term nears to a close, then it is time for you to apply for a mortgage or find financing.
The good news here is that applying for a mortgage or financing is pretty straightforward. You will look to secure the standard funding and work with lenders in the area that typically finance manufactured homes.
Clearly, you should still shop around, if at all possible, and continue to save where you can. Also, make sure that the lender abides by equal housing laws.
If your rent-to-own manufactured homes are located in a mobile home community, then you will need to go over the standard park rules and regulations that apply to a regular in-park purchase.
Likewise, it is important to remember that with a mobile home, you do not own the land that the house sits on, therefore, you will need to lease the lot or pay a lot rent.
Ultimately, choosing rent-to-own manufactured homes are a great way to get your foot in the door of your dream home.