RENT TO OWN

The dream is to own your own house. However, with bad credit quite common these days, it's no wonder that people want to know if buying a house with bad credit is possible. The best way is called a Rent to Own Option. Now, assuming you are renting, you probably fall under one of the categories below:

• You have missed past payments on credit cards or other bills and receive debt collection letters
• You have previously declared bankruptcy or experience house foreclosure.
• You’ve been turned down for credit card applications
• Loans have been declined in the past

Here are a few reasons why Rent to Own option is a good solution

• When you entering in the lease-option agreement with the owner, you are allowed the live in the home as if you actually own it. It's practically "your home".
• The details of the arrangement are pretty simple. You sign an agreement in which you rent the home for a period of time (usually a year or two) and as soon as you qualify for a home loan within the agreed time period, you buy the house at the originally negotiated price. You are basically 'leasing' the home with an option to 'buy' it.
• As the home appreciates in value, you get to 'cash in' on that increased equity when you buy the house. This is because you buy the house for the original negotiated price. Since house prices tend to increase with time, your house will likely be worth more than when you first 'leased it.' Buy the house at the lowered price and all the equity is yours. You are essentially locking in the tomorrow's market price today.

The biggest advantage here is that you can get this deal signed with bad credit or even no credit. It’s difficult to buy a house with no credit or to buy a house with bad credit. This Rent to Own option gives you that.

During the time you live in the home, we work closely with you to help you improve your credit.

Ready to get started? Fill out our application form today so that we can begin to find a home for you!

HOW TO FIX BAD CREDIT TO HELP QUALIFY FOR A MORTGAGE

CREDIT SCORE

• BAD CREDIT: Clean up any old bad credit and let it age (gracefully)
• APPLYING FOR CREDIT: Each time you apply for credit, your score drops. We recommend you keep your 'credit bureaus pulled' to 3-4 per year or less.
• GETTING NEW CREDIT:
  • Establish new credit and be good with it.
  • Always make your (at least minimum) payment on time
  • Do not go over your limit and try to keep your balance under 70% of the limit.
  • Lenders look for $1000-1500 of revolving credit with at least a re-payment history of at least 12-18 months. The greater the difference between your balances and your credit limits, the better your score.

PAST CREDIT CHALLENGES AND OVERCOMING THEM

• BANKRUPTCY: You must be two years discharged from bankruptcy and have at least one year of re-established credit, most preferably revolving credit, such as credit cards or lines of credit, before most lenders will give you a mortgage
• CONSUMER PROPOSAL: If you are in or have had a consumer proposal, it must be paid off one year before being able to get a mortgage.
• NO CREDIT SCORE: No credit score and not having credit is the same as having bad credit. You will need to establish credit.
• COLLECTIONS: If you have any of these showing, make certain they are paid or settled and reported to the credit bureau. If not reported it will be understood to be the same as if it is still outstanding. .

WHAT TO DO TO ESTABLISH OR RE-ESTABLISH CREDIT

• If you can't get a credit card, you will need to get a 'secured' credit card. There is a credit card company that will give you a credit card with a modest credit limit for a small deposit. This can help you get started. More preferred is a fully secured credit card available from most of the major chartered banks. You give them $1,000 and they give you a credit card with a $1,000 limit. Larger limits are preferred.
• Another way to re-establish credit (in addition to the credit card) is to get an RRSP loan, which most any bank will give you. They have the RRSP as security, so anyone can borrow for one. Choose the payment and term you are comfortable with.

OTHER CONSIDERATIONS

• Credit scores range from 350 at the low end up to 900 at the high end. The 'benchmark' considered good credit is a score of 680 or higher. The usual minimum a lender will look at for a traditional mortgage is 600.
• When a credit bureau is pulled and you are behind on a payment, it will show your score 30 to 50 points below your previous score. If your credit balances are near or over your limits, that will also be costly to your score if your credit bureau is pulled at that time. Once you pay the balances down, your score will increase once again.
• Credit reporting is on a 6 year revolving cycle, so anything that is on your credit bureau, good or bad, will drop off your score in the first month of the seventh year.
• Keep your old credit cards Older credit, assuming it has been good, is better credit, simply because of the history. If you stop using those older credit cards, the issuers may stop updating your accounts. As such, they will lose their weight in the credit scoring formula and, therefore, may not be as valuable - even though you have had the card for a long time. Use these cards periodically, even for small amounts, and then pay them off.