Some mortgage lenders may still greenlight your application if you have a good credit rating (670 FICO or higher) and a strong income. They often provide tailored mortgage solutions just for this scenario.

You can also actively improve your DTI before applying for a mortgage. For example, trimming debt or boosting your income through a raise at your primary job can quickly tip the scales in your favor.

If you're looking to buy a house, you can simplify the mortgage approval process with a skilled local buyer's agent. Their established lender relationships and expertise in preparing applications boost your approval chances. Start now by finding a top agent in your area.

What is debt-to-income ratio?

DTI ratio is the percentage of your gross monthly income that goes to paying your monthly debt payments and is used by lenders to determine your borrowing power, says Makenzie Wall, a loan officer at Society Mortgage. 

Research from the National Association of Realtors found that a high DTI ratio is the biggest reason lenders deny a mortgage application. It's a critical factor in determining how much of a payment you can afford without stretching your finances.

However, several loan officers we contacted, including Wall, argued that credit score and DTI ratio are equally important and go hand-in-hand.

"You might have the best credit score in the world, but your DTI ratio can be too high to qualify or vice versa," Wall explains. 

Two types of DTI ratio

Front-end DTI measures the percent of your income that goes toward housing costs only. For instance, if you spend $3,000 on rent or a mortgage and earn $10,000 a month, your front-end DTI would be 30%.

Back-end DTI is the go-to ratio for most mortgage applications. It's a broader measure, capturing not just housing costs but all your monthly debt obligations — student loans, car payments, and credit card bills.

What is an acceptable DTI ratio?

There isn't a one-size-fits-all number for an ideal or maximum DTI ratio. 

"An acceptable DTI ratio will depend on your credit score," says John Pagano, a loan officer at Society Mortgage. "The better your credit, the higher you can go on your ratio." 

Some guidelines exist to help both lenders and borrowers better understand DTI ratio requirements.

• The FDIC suggests that for front–end DTI, lenders prefer 28% or less.
• For back-end DTI, which includes all of your monthly debts, Fannie Mae's guidelines suggest a ceiling of 36%. However, some borrowers secure loans with DTI ratios up to 45%, especially if they have solid credit scores and a large nest egg. 

A DTI of 36% or lower is generally ideal for homeowners, according to the Consumer Financial Protection Bureau.

What is the maximum DTI by loan type?

While there are federal benchmarks for DTI ratios on various mortgage loans, it's crucial to remember that individual lenders set their own DTI criteria.

For those with a higher DTI, FHA loans might be the most accommodating, with some lenders allowing a DTI ratio as high as 57%. However, it's not unusual for lenders to cap this at 50% or even lower.

Conventional loans offer a bit less leeway, with the possibility of a DTI ratio up to 50% if the loan is manually underwritten by Fannie Mae. But you'll also need to bring a strong income and credit score.

VA loans are a mortgage reserved for veterans, service members, and qualified spouses. They are unique in that there's no official maximum DTI ratio. Lender preferences usually hover around a DTI ratio of 41% or less for approval. 

USDA loans become a potential option for homebuyers focused in rural locations. However, these loans are the most strict about DTI ratio requirements. Borrowers will likely need a DTI ratio of 41% or lower to get approved. 

How to get a loan with a high DTI ratio

Reduce your DTI ratio before applying

You can use free budgeting tools, like You Need a Budget or Empower's Personal Capital, to help you prioritize which debts to pay down first. 

However, remember that reducing monthly debt payments, not the total debt, is what will affect your DTI ratio. Simply reducing debts (such as car loans and personal loans) without fully clearing them may not change the ratio, notes David Naimey from Society Mortgage.

If you have high-interest debts, consider refinancing them. Doing so can reduce your monthly payments and save you on interest costs. Companies like Society Mortgage often provide free consultations to explore options for reducing your debts and DTI ratio.

Taking on a side job that matches your skills and interests can also boost your DTI ratio. Many lenders consider this extra income when calculating your DTI ratio. However, you must have worked the side job for at least one year for the income to be included in your ratio, according to Naimey. 

Boost your down payment savings

Minimum down payment requirements are just 3% for conventional loans and 3.5% for FHA. But you should aim to exceed the minimum down payment: It lowers the loan amount while signaling your commitment to financial stability.

Consider the 10-20% range as a target. This level of down payment can counterbalance a high DTI ratio, proving your ability to save and manage money effectively. Plus, it shrinks your monthly mortgage payment. 

Bonus: A 20% or larger down payment eliminates the need for private mortgage insurance (PMI), cutting your monthly expenses. 

» How to get a mortgage with low or no PMI

Apply with a co-signer or co-borrower

A co-signer with strong credit and a low DTI ratio could be a game-changer. They pledge to repay the loan if you can't keep up with payments.  

Timely repayments can positively impact both of your credit histories, but any missed payments could harm your credit scores. It's a partnership that demands trust and a clear understanding of the risks involved.

For an even stronger loan application, consider a co-borrower. Unlike a co-signer, a co-borrower owns the property and shares the payment responsibility with you.  

While co-borrowers are riskier than co-signers, they also present a more compelling case to lenders, potentially smoothing the path to your mortgage approval.

Hire a financial counselor

A certified financial counselor can tailor a debt management plan to lower your DTI ratio. They'll help you prioritize debts and utilize effective repayment techniques, such as the debt snowball method, which focuses on repaying your smaller debts first.  

For counseling services, consider non-profit resources such as the National Foundation for Credit Counseling (NFCC) and the Financial Counseling Association of America, government resources such as the U.S. Department of Housing and Urban Development (HUD), and local credit unions or community banks.

This article was reviewed by David Naimey, a loan officer at Society Mortgage.

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The cost of PMI depends on your credit score and finances and can range from 0.1% to 5% of the loan amount, potentially adding $10 to $500 or more to your monthly payments. 

Thankfully, there are ways to reduce or bypass PMI altogether, even without having to fork over a big down payment.

What is PMI, and how much does it cost?

PMI example: $450,000 mortgage 

PMI protects the lender (not the borrower) if you stop making payments on the mortgage.  

The most common way to pay PMI is through a monthly premium added to your monthly mortgage payment, although sometimes lenders may charge a one-time premium at closing. 

The cost of PMI varies based on factors including your credit score, down-payment size, loan amount, and the type of mortgage. A lower debt-to-income ratio and higher credit score will help reduce the amount of PMI you pay, according to David Naimey, a loan officer at Society Mortgage.  

PMI can certainly make a mortgage unaffordable for some borrowers. For example, on a $500,000 home with a 10% down payment, PMI could add $375 monthly if the rate is 1%.

Can I get rid of PMI?

Eliminating PMI on a mortgage after you've closed on a home purchase is possible but requires the following actions: 

• Paying down your mortgage to achieve 20% equity and then requesting the PMI's removal (which may require an appraisal to confirm your home's value).
• Reaching 22% equity through mortgage paydown, at which point lenders must cancel PMI as per the federal Homeowners Protection Act. 

Unfortunately, starting with 10% equity and reaching 20% to 22% can take 5 to 10 years with standard payments and no significant property value change.

How to get a no-PMI mortgage

1. Research lenders with no- or low-PMI loans

Several loan programs and financial institutions offer mortgages without PMI, and some lenders help their clients navigate the complexities of PMI before securing a loan. 

For example, Society Mortgage allows borrowers to pay a portion of the PMI upfront and then finance the rest into the borrower's monthly payment. 

"This will reduce the monthly PMI if they get a conventional loan," says Jeremy Szozda, a loan officer at Society Mortgage. 

Here's a rundown of some no- or low-PMI options.

No PMI mortgage loans

VA loans. No-PMI mortgage loans are available only for veterans, active military members, and spouses. VA loans also don't require a down payment, reducing out-of-pocket home buying costs.

USDA loans. These are ideal for homebuyers in rural areas. USDA loans often waive PMI. However, they require a guarantee fee that is essentially the same as mortgage insurance. USDA loans require the property to be located in an eligible location and might also require at least a “fair” credit rating (minimum FICO of 620) and income.

Low PMI mortgage loans

FHA loans. PMI is required on all FHA loans. However, in early 2023, the Biden administration announced the reduction of annual mortgage insurance premiums from 0.85% to 0.55% on FHA loans, estimated to save borrowers an average of $800 annually.  

"If you put 5% down [on FHA loans], this fee reduces to 0.5%, and with 10% down it will automatically get removed in 11 years," says Naimey. 

» FHA Mortgage Requirements for Home Buyers

Bank loans with no PMI

Bank of America Affordable Loan Solution. This program offers a fixed-rate mortgage with as little as 3% down. While it requires mortgage insurance, the bank says its rates are typically lower than conventional loans. Be aware of income and loan limits that may apply.

Citi HomeRun Mortgage. Like Bank of America's offering, Citi's program requires a down payment of just 3%, but it comes with no PMI. It's available for purchases and refinancing and covers single-family homes, condos, co-ops, and 2-unit properties.

Credit unions and nonprofits

Navy Federal Credit Union. The Homebuyer Choice program provides 100% financing for purchases without PMI, catering to first-time homebuyers. Membership extends beyond veterans and active military, so you might qualify even if you don't have a military background.

NASA Credit Union. Offering a $0 down, no-PMI mortgage for first-time buyers, NASA Credit Union opens its doors to non-NASA employees through membership in the National Space Society. The lender even offers a complimentary first-year membership.

The Neighborhood Assistance Corporation of America (NACA) has a unique mortgage program that requires no down payment, no closing costs, and no PMI. However, it does require some commitment: You'll need to attend a homebuyer workshop, become a NACA member, and work with a counselor to access this mortgage product.

Get a piggyback mortgage on a conventional loan

Piggyback loan: $500,000 house example

A piggyback loan, often referred to as an 80/10/10 loan or combination loan, is a savvy strategy for homebuyers looking to avoid PMI without putting 20% down. 

This approach is particularly beneficial for those with strong credit and a stable income, as it involves managing two separate loans. Here's what you need to consider.

How a piggyback mortgage works

You start by making a 10% down payment. Then, instead of covering the remaining 90% with a single mortgage, you split it further: You take a second mortgage for another 10% and a primary mortgage for the remaining 80%.

Here's an example: You're buying a house priced at $500,000. You would make a down payment of $50,000 (10%), secure a second mortgage for an additional $50,000 (10%), and then cover the remaining $400,000 (80%) with your primary mortgage.

This strategy allows you to bypass PMI, as you're effectively meeting the 20% threshold, but it does mean you'll be managing and making monthly payments on two separate loans. 

Consider a lender-paid mortgage insurance (LPMI) loan

An LPMI loan presents an alternative route for homebuyers looking to avoid PMI. There's no PMI, though you'll pay a higher interest rate on the mortgage.

While this arrangement frees you from making separate PMI payments, it could lead to higher total costs over the lifespan of your loan, particularly if you don't plan to refinance or sell soon. 

Consider the long-term financial implications of an LPMI loan before proceeding. Weigh the immediate benefit of avoiding PMI against the potential for increased costs over time due to the higher interest rate. This calculation often depends on how long you intend to stay in the home.

LPMI loans may work best for:

Short-term homeowners. If you intend to live in your home for only a few years, an LPMI loan could be a practical choice. The higher interest rate may have less impact over a shorter period, making it a workable option for those who plan to sell soon.

Refinancers. For homebuyers planning to refinance their mortgage shortly after purchasing the home, an LPMI loan can be an option. Since you'll likely pay the higher interest rate for a short time before refinancing, it could be a cost-effective strategy. 

But this option is also risky because it relies on the assumption that mortgage rates will fall in the future, which is not guaranteed. Contact a mortgage lender for more specific advice.

This article was reviewed by David Naimey, a loan officer at Society Mortgage.

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Before you start house hunting, check your credit report first. It shows you exactly what lenders are seeing and what you need to fix to boost your credit scores. Just a small bump in your credit score could mean the difference between rejection and approval.

Next, you can dig into research on mortgage lenders that provide options for those with less-than-perfect credit.

It's also smart to connect with a specialized local buyer's agent who works with clients who have low credit scores. They'll provide expert guidance and strategies to improve your chances of mortgage approval, even with credit challenges. Begin your journey by finding a top agent in your neighborhood today.

What do lenders consider a "bad" credit score?

Lenders take a close look at your FICO score on your mortgage application, considering the middle of your three scores, according to David Naimey, a loan officer at Society Mortgage. 

In fact, a low credit score is the reason for about 25% of all mortgage application denials.

"Credit is the first thing we look at, and the score determines if we proceed with moving forward and obtaining income documents," says Makenzie Wall, a loan officer at Society Mortgage. "The items on the credit report, like any late payments, foreclosures, and bankruptcies, also play a role."

This three-digit number ranges from 300 to 850 and is issued by the three major credit bureaus: Experian, Equifax, and Transunion. It gives lenders a good idea of how you've handled money in the past, but it's not always accurate. 

Your credit score is considered "poor" or "subprime" if it dips below 580. Even if you're making good money or can put down a large down payment, lenders might still reject your application. It likely means extra hurdles when trying to qualify for financing. 

If your score sits in the 580 to 669 range, the credit bureaus would call that "fair." That's a fancy way of saying lenders might view these borrowers as a gamble, but less risky than those with "poor" credit.

Home loan options for borrowers with low credit scores

The quest for a mortgage might feel out of reach, especially when the median credit score for new mortgages is a lofty 769, according to the Federal Reserve Bank of New York, while Fannie Mae places the average score for first-time home buyers at 746.  

These numbers might seem discouraging if your credit score doesn't quite reach these heights. But there's a variety of mortgage options that could be within your reach. 

VA loans. For veterans, active-duty service members, and eligible spouses, a VA loan is particularly appealing because the Veterans Administration doesn't set a minimum credit score. While lenders often look for scores around 620, the absence of a VA-mandated minimum may open doors for many who have served our country.

FHA loans. First-time home buyers, or those lacking a robust credit history, might find an option in FHA loans. 

The Federal Housing Administration allows for scores as low as 500 if you can make a larger down payment (10% or more). And it's not just about the score: If you've got a steady income and manageable debts, you're in a good position to qualify.

Conventional loans. The conventional loan route typically favors borrowers with good credit (scores starting at 670). But the technical minimum is 620. That's right in the “fair” credit zone, according to Equifax. So a conventional loan might not be as out of reach as you think.

Bad credit? What to do before applying for a mortgage

1. Check for errors on your credit report

Start by getting your credit report from all three credit bureaus at AnnualCreditReport.com. 

It's not uncommon to find mistakes, and these can unfairly lower your score. From late payments that were actually made on time to debts that aren't even yours, the errors can be significant. 

If you spot any inaccuracies, contact the credit bureaus and the creditor immediately to dispute them. Resolving these issues can help ensure that your credit score accurately reflects your financial history.

» Learn how to dispute an error on your credit report 

2. Pay down debts

Your FICO score is heavily influenced by how you handle your credit cards, student loans, car loans, and other debts. Your payment history and amounts owed are the most significant factors in your FICO score.

Focus on paying down credit card balances first to boost your credit score, and then focus on paying off any medical collections, says David Naimey, a loan officer at Society Mortgage. 

You also can consider setting up automatic payments for your debts to keep yourself on track and prevent missed payments, which hurt your credit. 

If you're overwhelmed by high-interest debt, the Financial Counseling Association of America (FCAA) can offer assistance. The FCAA helps consumers reduce their interest rates significantly through debt management plans, leading to big savings over time.

3. Budget for your down payment 

A large down payment can help you secure a mortgage, especially if you have less-than-perfect credit. You'll need to budget carefully to fund the down payment, closing costs, and other home-buying costs. 

Assess your finances to determine how big a down payment you can afford on your home purchase. Free budgeting tools, like You Need a Budget or Empower's Personal Capital, can help you track your income and expenses and create a savings goal. 

You can also research down payment assistance programs or grants that could provide the financial boost needed to transition from prospective buyer to homeowner. 

4. Take a homebuyer education course

Knowledge is power, particularly with home-buying. Consider taking a home buyer education course through HUD or Fannie Mae. 

Fannie Mae and Freddie Mac offer first-time home buyer programs requiring the borrower to complete a home buyer education course, says Jeremy Szozda, a loan officer at Society Mortgage. 

"This ensures that first-time home buyers have as much information as possible and do not get taken advantage of during the loan process," he says. 

These courses offer valuable insights into the home-buying process, can help you plan financially for the purchase, and may even provide completion certificates that can be helpful when dealing with lenders.

5. Get a co-signer

Teaming up with a co-signer could be a smart move to strengthen your mortgage application and boost your approval chances. A co-signer with a stronger credit score can be your ally, providing lenders with the assurance they need to approve your loan. 

Having a co-signer means someone else is responsible for the mortgage alongside you. Should you face any financial difficulties that prevent you from making payments, your co-signer will need to step in.

Co-signing a mortgage is a big commitment. It's best to only choose a co-signer you have confidence in and who has the financial capability to assume this responsibility.

This article was reviewed by David Naimey, a loan officer at Society Mortgage.

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What to look for in an agent | Red flags | How to find a listing agent | FAQ

Choosing a realtor to sell your home is one of the biggest financial decisions you'll ever make. You'll get the best results by interviewing 2–3 qualified realtors to understand their experience, expertise, and communication style.

To find good agents to interview, we recommend using a free agent matching service like Semya-Moya. Clever has a large network of top local listing agents who have already been screened for experience, sales performance, and customer ratings.

Keep reading to learn more about picking the right real estate agent to sell, including how to find and interview agents and what red flags to avoid.

What to look for in a realtor when selling

Most real estate agents have experience helping clients buy and sell homes. When an agent represents a home seller, they're called a seller’s agent or a listing agent.

A full-service listing agent guides you through the entire selling process. They typically help you:

• Set a fair asking price
• Prepare your home for sale
• Market your home, including listing it on the MLS and popular home search sites
• Coordinate showings with prospective buyers
• Host open houses
• Negotiate contracts

You can find lots of experienced real estate agents. But each has their own personality, selling strategy, and communication style. Here are a few qualities to look for to help you find the best listing agent.

Relevant experience and expertise

Look for an agent who has experience with real estate transactions like yours in terms of property type, price, and location.

The best real estate agents usually have a long list of past sales and active real estate listings. They've successfully sold homes in different markets and can show you their sales record to prove it.  

They can also demonstrate an understanding of the broad and local economic factors that may impact your sale. And they may have special designations, such as Certified Residential Specialist (CRS) or Graduate Realtor Institute (GRI).

Full-time availability

Real estate transactions are time-intensive and require an agent to juggle schedules and deadlines. So you want an agent who treats selling real estate as their full-time profession rather than a side job. In a slower market, a part-time agent may not hustle to successfully sell your home. In a fast-moving market, that same agent may not be as responsive as you need them to be.

Local market knowledge

Real estate markets change, and what's normal for one market may not apply to another. A good real estate agent knows your area and can educate you on current market conditions. For instance, they can tell you the number of active listings in your area, how quickly homes are selling, the average list-price-to-sale-price, comparable listings that have recently sold nearby, and more. 

A top local real estate agent knows which homes are selling quickly versus sitting on the market and why. When they offer pricing or marketing suggestions, they can back their opinions with MLS data.

Marketing skills

Selling real estate also involves strong marketing skills. Real estate professionals know how to highlight your home’s best features, attract the right buyers, and get the word out. They can offer ideas for marketing hard-to-sell homes or a property that needs to sell quickly. If they market their brokerage and listings well, chances are they’ll do the same for your home.

Negotiating skills

Top real estate agents are comfortable negotiating. They understand what each side wants, advocate for you, and know how to finesse a deal. They should be able to describe success they’ve had with hard-to-win deals and offer strategies for various scenarios. 

Strong local network

Look for an agent with a strong local network in their industry. They can help you find quality lenders, photographers, contractors, appraisers, and other professionals who can move your home sale along.

Professionalism and integrity

A good agent operates transparently and sets realistic expectations based on your property and local market. They're clear and consistent communicators who put your best interests above their bottom line. They’re also organized, on top of deadlines, and tactful in their dealings with you and others. 

Focus on the client

A high-quality agent understands your goals and does what they can to help you achieve them. They won’t push you toward a particular course of action that isn’t in your best interests.

Red flags to avoid in a listing agent

Selling your home is a high-stakes decision. You need someone you can trust to help you establish a selling strategy and navigate the process. 

Here are some red flags to watch out for to avoid bad selling agents.

• Lack of experience. Newer agents aren’t necessarily bad. They often work hard to earn your business. But you'll want to interview them to make sure they understand the local market, your needs, and the selling process. Steer clear of agents who provide vague answers to your questions about their selling strategy and the state of the market.

• Overpricing or underpricing the home. Some agents will overprice a home to earn your business. But if you're home is priced too high, there's a huge risk that it'll sit on the market for a long time. And an agent who underprices your home can cost you money compared to an agent who does a careful comparative market analysis.

• Unwillingness to negotiate commission. It can be a red flag when an agent refuses to professionally discuss their rates and consider negotiating with you. Most realtors are willing to at least listen to your reasoning behind asking for a lower rate than the current average realtor commission or a low flat fee.

• Weak online presence. Realtors who have an outdated or minimal online presence may not have the technical skills to effectively market your home across multiple online platforms. Online marketing is essential since buyers and their agents research online before visiting properties in person.

• High-pressure tactics. Avoid agents who are impatient or create a false sense of urgency. You don't want an agent who tries to push through a sale at all costs just so they can collect their commission. You need an agent who uses thoughtful strategies to help you reach your goals.

• Lack of transparency. Avoid realtors who supply only vague answers to questions, won’t provide references, engage in dual agency without disclosure, or have unclear listing and contract terms.

• Lack of communication. A real estate transaction requires regular and open communication. You want to avoid realtors who are slow to return your calls, emails, or texts and don’t respond to questions thoroughly. Also avoid realtors who have a communication style that doesn’t match your needs. 

How to find a good realtor for selling

Choosing the right real estate agent can make the selling experience easier and less stressful. So it’s important to find an agent you like who has the knowledge, experience, and communication style you need.

Here are four steps for how to choose a realtor to sell your home.

1. Gather referrals for at least 2–3 agents

You want multiple candidates from reliable sources. That way, you can compare quality agents and save time. Here’s how to quickly create a short list of options.

Use an agent matching service

Using an agent matching service is a fast, convenient way to find top realtors in your area. Many of these companies also negotiate discounts with their agents so you can save on realtor commissions.

For example, if you request agent matches from Semya-Moya, the company learns about your situation and preferences. Then it matches you with top real estate agents from name brand brokerages like Keller Williams and RE/MAX.

Clever also has built-in commission savings, so you don't have to negotiate. You'll get a 1.5% listing fee instead of the typical 3%.

Agent matching services are free, and there's no obligation to move forward with an agent. They're worth at least trying out to see if you like any of the agents they recommend.

Get recommendations from neighbors and friends

You can ask for referrals from neighbors and friends, and they can help you know what working with a particular agent is really like.

However, even if an agent is well-recommended, you don't want an agent who lacks experience in your area. Real estate is local, and you need someone who knows the area and can education you on the local selling market.

Also be cautious of hiring a friend (or a friend of a friend) you can’t easily fire or confront if they don't meet your expectations.

Search online

You can do a quick Google search for “best realtors near me” to find well-rated real estate agents in your area. You'll likely get a lot of results to sift through, and it'll take time to research and reach out to agents. 

2. Check the agent’s credentials

Once you have a short list of agents, you’ll want to do some online research to ensure they're a good fit for you. Here are three ways to check their credentials.

Look for excellent customer reviews

Search for customer reviews across various platforms and the agent’s personal website. Read both positive and negative reviews, focusing on ones within the last year. See if previous customers liked working with them and if they appreciated their communication style, office efficiency, and professionalism.

These reviews can give you a feel for what it's like working with a particular agent.

See if they have recent and active listings in your area

Find out how many recent and active listings they have in your area, and see if the listings are similar to your home. This can help you know whether they're up-to-date on current market conditions and have relevant experience.

Verify their real estate license

You’ll also want to verify that they have an active real estate license in good standing. You can visit the Association of Real Estate License Law Officials website for a national search or view your state’s website.

3. Schedule interviews 

After screening the agents, set up a time to interview them. This important step helps you understand their personality, communication style, local market knowledge, and selling strategy. You'll also have a chance to ask the listing agent questions.

Here are tips to help you prepare and get the most from your interviews.

Do a walk-through

The listing agent may want to meet at your home. They'll see how it shows, factor that into their pricing analysis, and talk through a strategy to sell your house.

During the walk-through, tell the agent about notable features and any repairs or improvements you've made. The agent should listen carefully, take notes, and provide sound advice, including whether you need an appraisal before selling your house. 

Discuss the local market

A listing agent should have insight into the current market, what homes are selling for relative to their listing price, and how long your home might take to sell. They should also have ideas for how to market your home based on local market dynamics and your selling timeline.

Review your goals

The agent should ask about your goals — whether you want a quick sale or the highest price, whether you need to time the sale with buying a home, and what you want your level of involvement to be. This information helps them customize their strategies to your needs.

Talk about the listing price

A quality agent can clearly explain their pricing strategy for your home, including providing a comparative market analysis. The agent may also give you a seller net sheet. This one-page document gives you an estimate of how much money you could make after factoring in all sale costs.

Go over a sales strategy

A good agent has a plan to make your home stand out to buyers, like through photography, advertising, and open houses. They can also make suggestions for selling your home based on your needs, like if you need to sell as is or on a specific timeline. And they can tell you which repairs and updates will likely get you the most return on your investment.

4. Agree on the details

Make sure you understand the listing agreement before you sign it. A listing agreement is a legally binding contract that gives the agent an exclusive right to sell your home.

Here are some the key details you need to understand and agree on before signing:

• The listing price and how the agent determined it
• The length of the listing term (e.g., 3 or 6 months)
• The realtor commission for the listing agent and buyer’s agent
• The agent’s responsibilities, including what services they provide
• Your responsibilities as a seller
• Who gives you updates on the sale and how often
• Guidelines for terminating the relationship if either party isn’t satisfied 

» JUMP: Back to the top

Choosing a realtor to sell FAQ

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Why you should trust us

Clever has helped thousands of home sellers choose the right realtor. We strive to deliver objective advice that we'd give to our friends and family, and follow ourselves. You can learn more about Clever and our editorial policy here.

Our guide represents hundreds of hours of research and interviews with real estate agents, investors, and home sellers.

We spoke to Bill Donius, former CEO of Pulaski Bank and NY Times best-selling author (who happens to serve on Clever's board of advisors). Donius has sold numerous homes and spent many years working with agents and brokerages as a loan office and mortgage executive.

We also studied research from the National Association of Realtors 2021 Home Buyers and Sellers Generational Trends report.

The post How to Choose a Realtor to Sell Your Home: Where to Look, What to Ask appeared first on Semya-Moya.

For a home buyer living in a baseline area, the monthly mortgage payment on a $1 million home may range from $4,354 to $5,329.  These numbers are based on:

• A 30-year conventional mortgage with a balance of $726,200, the maximum amount allowed under Fannie Mae and Freddie Mac guidelines
• A down payment covering the remaining balance of $274,800
• A fixed interest rate of 6% to 8%
• Principal and interest payments only

In high-cost areas, such as parts of California or New York City, the loan limit rises to $1,089,000. In this case, your monthly payment would range from $5,696 to $6,971. You might be able to buy a $1 million home with just 5% down, or $50,000.

However, these figures do not include private mortgage insurance, which is required when you put less than 20% down, plus other costs, including property taxes and insurance.

Getting a mortgage on a $1 million home

Mortgages on $1 million homes work differently than mortgages on lower-priced houses because of conforming loan limits, the maximum amount allowed under Fannie Mae and Freddie Mac guidelines.[Conforming Loan Limit Values, Federal Housing Finance Agency]

For "conforming mortgages" in baseline areas — i.e., within the conforming amount of $726,200 — the process is straightforward: buyers typically make a down payment of up to 20% of the home's purchase price. Whatever amount remains is the mortgage balance.

The process flips for mortgages above $726,200. The loan limit determines the mortgage amount, and the remainder is the buyer's down payment.

Example: $500,000 home vs. $1 million home

Because of the hefty down payment requirements, lenders offer alternative loans that can be more affordable up front.

A piggyback loan, also known as a combination mortgage, is a multi-part loan to cover separate parts of the home purchase. For example, with the most common type of piggyback loan, an 80/10/10 loan:

• The primary mortgage covers 80% of the home's purchase price
• A second mortgage or home equity line of credit covers 10%
• Your down payment covers the remaining 10%

Jumbo loans exceed conventional mortgage limits. They're hard for most borrowers to qualify for because jumbo loans tend to have stricter credit score and income requirements than traditional mortgages.

So which mortgage should I get?

Monthly payments on a $1 million house with a conventional loan

Here's a range of monthly payment estimates (principal, plus interest) for a conventional loan, based on interest rates.

Total interest costs: $726,200 mortgage at 7%

Deciding which loan terms work best for you comes down to weighing total cost versus. flexibility.

For borrowers who want to minimize costs and who can handle higher monthly payments, a 15-year term might be the ideal choice.

For those valuing financial flexibility, the 30-year term is a sound choice. The monthly payments are more manageable. And you can refinance the loan in the future if interest rates dip.

Consult with a mortgage professional for more specific advice tailored to your circumstances.  

Monthly payments on a $1 million house with a piggyback loan

A piggyback loan can help you keep a high mortgage conforming and potentially more affordable.

With an 80/10/10 underwriting approach, you can mortgage 80% of the property's price, finance 10% with a second mortgage or HELOC, and make a 10% down payment.

👍 Piggyback benefits:

• No private mortgage insurance (PMI)
• Easier qualification

👎 Piggyback downsides:

• Higher interest rate on the second loan
• Variable-rate home equity line of credit (HELOC)

If your piggyback loan is a HELOC, the interest rate and your payments will fluctuate annually based on the market.

"The interest rate for a second mortgage [HELOC] is usually around the prime rate, between 8.5% to 10.5%, with interest-only payments for 3 to 10 years."

— Joe Moore, division manager, Secured Choice Lending

80/10/10 loan example ($1 million house)

A $1 million property financed with a $800,000 first mortgage and a $100,000 second "piggyback" mortgage HELOC will have a total monthly payment of $6,072.

However, you may be paying interest only on the second mortgage for the first three years. Then your payments include principal, too, and get higher.

Jumbo loans

A jumbo loan is a home loan used for higher-priced property exceeding federal loan limits ($726,200 for one-unit property, and $1,089,300 in high-cost areas in 2023.)

According to industry expert Joe Moore, jumbo loans are a less popular choice among borrowers, accounting for only 2-3% of all mortgage loans. The low popularity is due to its stringent requirements.

For example, jumbo loan borrowers typically have to maintain cash reserves of 6 to 20 months of their mortgage payments, according to Moore. That means lenders need to see you have $36,000 to $120,000 in your bank account to afford a $6,000 monthly payment.

Applicants still need to make a big down payment, often 10% or more, as well as have a high credit score (680 minimum).

Payments on million-dollar mortgages vary depending on:

• The type of loan
• The loan's interest rate
• Repayment term
• How much you put down

This article was reviewed by Joe Moore, division manager at Secured Choice Lending.

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The post Buying a $1 Million Home? Here's What Your Mortgage Will Be appeared first on Semya-Moya.

The best approach depends on the amount of rent due, the reason for delayed payment, the terms of the lease, and local landlord-tenant laws.

Eviction isn’t always the best option. Depending on your situation, you can:

• Work out a repayment plan with your tenant
• Apply for federal rent assistance
• Offer cash for keys

Here are the best strategies for navigating such a delicate situation.

» Tired of being a landlord? Get cash offers for free today with Clever Offers

Tenant not paying rent? Here are your options

Before you make any major decisions, we recommend consulting a lawyer and reviewing your local laws and lease. Then you can find a solution based on what your tenant’s situation is.

Slightly behind on rent (1–2 months)

If this is the first time your tenant is late on rent and is only around a month late, find out why. Then you can make a plan to get payment back on track.

Approach your tenant with curiosity and compassion. Ask them why the payment is late. If they have a legitimate reason, find a solution for both parties.

One option is offering a few weeks grace period with no rent charges while the tenant gets their finances together.

If the tenant doesn't have a good reason or has been late on rent multiple times, they might be withholding rent. In that case, candidly discuss the issue and consider charging a late fee (if applicable).

Deeply behind on rent (3+ months)

If a tenant is very late on their rent payment, you can create a long-term repayment plan. Repayment plans typically involve smaller, more frequent payments to help tenants catch up.

When creating a repayment plan, you need to establish clear terms and conditions. Consider:

• How much to charge per payment
• How often payments will be due (weekly or bi-weekly)
• When payments revert to the regular monthly rate
• What happens if the tenant continues to miss payments or pays late

Facing an unforeseen financial hardship

Sometimes a tenant might be late on a payment because of issues like job loss, illness, or a death in the family. In this case, you can make a repayment plan or apply for federal rent assistance.

Emergency rental assistance programs provide funds for financially struggling landlords and tenants. Some programs also provide resources like job training and home repair assistance.

The availability of these programs varies by area. View the CFPB website for more information.

Refusing to pay rent or leave the property

1. Offer cash for keys

Cash for keys is a one-time cash payment to the tenant to leave the property. Investors often use this strategy to avoid expensive evictions and lawsuits. The amount is typically half a month to a full month's rent plus the security deposit.

Investors often use cash for keys to avoid costly, time-consuming evictions and lawsuits. This strategy usually takes a few days, and evictions take at least a month and sometimes much longer.

Make sure you make this a formal, written agreement. We recommend consulting an attorney and reviewing local landlord-tenant laws before proceeding.

2. Sell the property to an investor

You can legally sell a property with tenants who are behind on rent. Selling to an investor can save you time, money, and stress compared to selling on the open market.

Here are some of the benefits:

• The investor manages the tenant issue after closing.
• Selling to an investor is usually fast (2–3 weeks instead of months to sell on the open market).
• Investors often pay for properties in cash and in as-is condition. So you won't have to deal with inspections, repairs, negotiations, or financing underwriting. The streamlined process reduces the work you have to do during closing.

The biggest downside of selling is that investors often pay less than fair market value. But that might not be as much as your potential losses if you hold onto a property with a tenant who's not paying rent.

If you decide you want to sell to an investor, you have a few options:

• Use a cash home-buying platform. Platforms like Clever Offers provide access to a network of local, regional, and national cash buyers. The services maximize your chances of getting competitive offers on your property.
• List your property with a realtor. Selling on the open market might take longer, but you'll likely get a higher sale price.

» LEARN: Why Clever Offers is a legit home sale option

Tenants still won't leave after you've tried everything

Last resort: Filing an eviction notice

Eviction is a last resort for many investors for a few reasons:

• It's costly. The total cost to evict a tenant is often close to $4,000. You'll have to pay various legal and court fees and repair costs. And you still won't get the missed rent payments back.
• It's time-consuming. Eviction can last for weeks or months. And during that time, you'll still have to pay property bills without rent payments.
• It harms your tenants. Eviction can damage your tenant's credit score and ability to secure future housing.

If you decide to go with eviction, we recommend you speak with an attorney before proceeding. Violating local laws can lead to penalties, delays, or legal trouble.

Tenant not paying rent? Next steps

No matter which solution you choose, these are the best first steps to solve your issue with your tenant.

1. Consult with a real estate attorney

A real estate attorney can help you navigate and follow local landlord-tenant laws. They can clarify all your options and find the best path forward for you.

Attorneys can be expensive. Fees depend on the property's location and the attorney's experience level. But consulting with an attorney may be worth the cost.

They can help you avoid drawn-out legal battles and even more missed rent payments. So hiring an attorney might even end up saving you money.

» Get a pro in your corner: Find a local real estate attorney

2. Review local landlord-tenant laws

Landlord-tenant laws vary from state to state. Research those laws and find out your rights and responsibilities as a landlord. Then review your tenant's rights to ensure you meet legal requirements.

Make sure you look up the proper procedures to settle housing disputes in your state. HUD's state-specific information and Avail's education center are great places to start.

» MORE: Review Nolo's all-in-one legal guide for landlords

3. Review your lease

Your lease outlines any acceptable reasons and consequences for not paying rent. It should include any late payment fees or timelines to get current on rent.

For example, your lease might say you need to fix issues that make the apartment uninhabitable. These issues could include extended power and water outages, infestation, or other serious problems.

If the tenant has made you aware of an issue like this, they have the right to refuse to pay rent until you fix it.

Your lease should also include the process for lease termination. For example, it should state how long a tenant has to vacate the property and when you can withhold a security deposit.

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The post Tenant Not Paying Rent and Won't Leave? Explore Your Options appeared first on Semya-Moya.

Rent-to-own homes in Las Vegas allow potential homeowners with low credit or limited funds to rent a property, with an option to buy it in the future. It's often advertised as an option for buyers who face financial barriers, such as poor credit or limited savings.

What to know about rent-to-own homes in Las Vegas

Limited choices

Rent-to-own homes are uncommon in Las Vegas. Your realtor likely won't find any listings on the multiple listing service (MLS), and you may have trouble spotting listings on popular real estate websites like Zillow. Only two national RTO companies – Home Partners of America and Trio Homes – currently operate in the area.

"I've been licensed since 2006, and it's never been common here," says DeShawna Whitmore, a realtor with Realty One Group. "People tend to be uncomfortable with the contracts and have had negative experiences with lease-to-own agreements."

Poor history

Negative experiences include not being able to qualify for a loan and purchase the home before the lease expires, resulting in costly termination fees and the loss of savings meant for the down payment.

"[Rent-to-own] can lead to people feeling duped if the home doesn't appreciate fast enough," adds Whitmore.

Not a good fit for the current Vegas market

From May 2022 to March 2023, single-family home prices in Las Vegas fell by $57,000. "This is the first time in 11 years we're seeing a decline in prices, and that impacts your ability to purchase a home that's supposed to appreciate every year," says Whitmore.

Why that's a problem: Your cost to purchase a home in a rent-to-own program rises every year. If the home appraises for less than your purchase price, you'd likely have to cover the difference or end your contract.

It's a business model that works much better in a market where home prices are rising 10–20% or more every year — but not in the current market, Whitmore explains.

Compare rent-to-own options in Las Vegas

Home Partners of America is one of the easiest rent-to-own programs to qualify for and has over 1,000 active listings in Las Vegas. It offers flexible renting options for single-family homes and townhouses up to $650,000.

Unlike popular rent-to-own companies like Divvy, a portion of your rent does NOT go toward your down payment savings. You simply have the option to buy the house during your lease.

However, Home Partners is an expensive option over the long run. Your cost to purchase the home rises by 3% to 5.5% every year, regardless of market conditions. So a Las Vegas home initially valued at $490,000 could cost you up to $670,000 if you rent the house for five years, even if home prices fall during that time.

Local landlord listings

Landlords who offer rent-to-own homes in Las Vegas can set their own eligibility criteria and requirements. The payment structure, lease length, purchase price, and other conditions often vary among landlords.

"Often, these agreements don't work out as expected because the price and rent credits don't align with what was initially agreed upon," Whitmore says. "Without an agent to guide the transaction, these agreements can be problematic."

» LEARN: 5 Signs of a Rent-to-Own Scam (and How to Avoid One)

Rent-to-own home alternatives in Las Vegas

"Between down payment assistance and seller concessions, I've seen a lot of people close on their home while only bringing $500 or less to closing," says Janese Williams, a mortgage loan originator with Champions Mortgage, based in Sugar Land.

Free resources in Las Vegas

Local housing counselors

Neighborhood Housing Services of Southern Nevada (NHSSN) offers one-on-one pre-purchase counseling to help you make well-informed choices and point you to valuable resources to help you accomplish your homeownership goals.

» FIND: HUD-approved housing counseling locations in Nevada

Housing education programs

The Nevada Housing Division and Freddie Mac offer a free online course that covers credit scores, budgeting, and the home buying process.

The NHSSN's home buyer education course, offered through eHome America, helps you determine if homeownership is the best option for you.

Why you should trust us

Our team at Clever spent several weeks learning the ins and outs of rent-to-own homes to create this comprehensive guide. We identified legitimate companies that operate in your area, consulted with local realtors, and researched government housing resources.

Our experts

• DeShawna Whitmore, a Las Vegas realtor with Realty One Group. Whitmore has 17 years of experience and her team specializes in helping home buyers, including clients who want to pursue rent-to-own options.
• Steve Nicastro, a real estate professional who has advised numerous clients on whether rent-to-own housing is a good option for them. His expertise helped us provide a more in-depth understanding of the rent-to-own process.

Related reading

How to Rent-to-Own a Home With Bad Credit

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5 Signs of a Rent-to-Own Scam (and How to Avoid One)

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The post Rent-to-Own Homes in Las Vegas and Best Alternatives appeared first on Semya-Moya.

Rent-to-own homes allow you to rent a home with the option to buy it in the future. The contract requires an up-front payment that's either a renewable option fee or a down payment. They're usually easier to qualify for compared with traditional financing, with lower credit score and income requirements.

Read our guide to learn more about rent-to-own homes in Jacksonville and consider your other options.

What to know about rent-to-own homes in Jacksonville

Uncommon

Rent-to-own accounts for only 5% of all transactions in the Jacksonville area, according to Nathan Claire, a realtor with Realty One Corp. and founder of Buying Jax Homes. Several national rent-to-own operate in Jacksonville, but options are still pretty limited.

Higher-than-market cost of living

Major rent-to-own companies operating in Jacksonville require 1–2.5% down, on top of an application fee, security deposit, or earnest money. That's less than the 3% down payment you could get from a government loan, but you'll probably get charged more elsewhere.

You may also be responsible for some or all of the home's repair and maintenance costs during your lease period, unlike a traditional rental, where those costs are handled by the landlord.

Plus, your monthly rent might be higher than for a traditional rental. For example, rent-to-own company Divvy Homes reportedly charges 37% more for its rentals in Jacksonville than other landlords.

Declining home prices

While Jacksonville home prices rose by more than $30,000 in 2022, they also fell by about $5,000 from November 2022 to March 2023, according to Zillow.

Lenders base their loans on a home's appraised value, so in case of a low appraisal, customers would have to pay the difference out of pocket, extend their leases, or end the contracts.

Compare rent-to-own options in Jacksonville

Rent-to-own agreements often allow less-than-perfect credit, relatively low monthly income, and a small deposit to make homeownership easier compared with purchasing it outright. Local landlords may be more willing to negotiate than national rent-to-own companies.

🏆 Top pick: Home Partners of America

Home Partners has over 1,000 rent-to-own homes listed in the Jacksonville area. It’s relatively easy to qualify for, with a low minimum credit score and minimal up-front costs.

Divvy Homes is newer to the Jacksonville area. It has relatively lax qualification requirements, with the lowest minimum credit score and income requirements among the companies reviewed. However, Divvy could charge as much as 37% more than other rentals (e.g., $1,500 versus $2,055 for Divvy).

» MORE: How to Fix Your Credit Score in 6 Months

Landis is the most challenging option to qualify as you'll need good credit and a strong income. It also has one of the most expensive down payment requirements of any rent-to-own option.

Because of its stringent requirements, Landis works best for people who could afford a traditional mortgage but may be new to the area and don't want to commit to a specific location.

Trio technically operates in Jacksonville but has very few listings available.

Local landlord listings

You can find rent-to-own landlords and investors on websites such as Zillow, Realtor.com, and Rent-to-Own Labs.

Working with a local landlord or investor could be more flexible than dealing with a bank or mortgage lender. For example, a small-business owner in Jacksonville who doesn't qualify for a mortgage loan due to unreported income might successfully negotiate a rent-to-own contract with a local landlord, Claire explains.

"The landlord is more likely to work with them if something happens financially, compared to a financial institution or bank, where they don't even know the person running it," says Claire.

Local landlords offering rent-to-own may request a down payment of 5–10%, according to Claire, which is just as much as traditional financing options. However, securing a rent-to-own listing through a local landlord can also offer more flexibility if the home's appraisal comes in low at the time of the purchase, according to Claire.

🏡 Get help from a local realtor

A real estate agent with direct rent-to-own experience can be a valuable resource for finding legitimate listings in Jacksonville and guiding you through the process. A reputable realtor can help you:

• Determine if rent-to-own is a good option for you compared with a mortgage or renting and saving
• Alert you to red flags in available housing options and rent-to-own listings in your area
• Direct you toward local housing resources, such as down payment assistance programs or housing grants

✍️ Editor's note

While we always recommend consulting with a local realtor or attorney before entering into any rent-to-own agreement, rent-to-own makes up a small percentage of the real estate market — only about 5% in Jacksonville, according to Claire.

With most agents focusing on traditional listings, finding a Jacksonville rent-to-own realtor on your own could be challenging.

» LEARN: How to find a real estate agent that's right for you

Rent-to-own home alternatives in Jacksonville

Note: Some assistance programs require a home buyer education course.

Free resources in Jacksonville

Local housing counselors

Pre-purchase, rental, and housing counselors can give you free, unbiased opinions on rent-to-own arrangements and direct you toward other housing opportunities in Jacksonville.

» FIND: HUD-approved housing counseling locations in Florida

Housing education programs

Habitat for Humanity Jacksonville offers a first-time home buyer education class in partnership with eHOME America.

Jacksonville Housing's Family Self-Sufficiency Program provides credit counseling, financial literacy classes, mortgage education workshops, and other services.

Wealth Watchers is a HUD-certified Housing Counseling and Community Development organization that offers home buyer education courses, pre-purchase housing counseling, and a variety of other services.

Why you should trust us

Our team at Clever spent several weeks learning the ins and outs of rent-to-own homes to create this comprehensive guide. We identified legitimate companies that operate in your area, consulted with local realtors, and researched government housing resources.

Our experts

• Nathan Claire, a real estate agent with Realty One Corp. and the founder of Buying Jax Homes.

• Steve Nicastro, a real estate professional who has advised numerous clients on whether rent-to-own housing is a good option for them. His expertise helped us provide a more in-depth understanding of the rent-to-own process.

Related reading

Rent-to-own Pitfalls: How to Avoid Getting Stuck in a Bad Deal

Learn more about the biggest rent-to-own pitfalls to avoid, including paying more for a house than necessary and choosing the wrong home for your needs and budget.

5 Signs of a Rent-to-Own Scam (and How to Avoid One)

Rent-to-own is an unregulated market that’s prone to scams. Learn the key signs of rent-to-own scams to avoid losing your hard-earned money.

The post Rent-to-Own Homes in Jacksonville and Best Alternatives appeared first on Semya-Moya.

If you're considering buying a home but are not quite ready to make a commitment, you may want to consider looking for rent-to-own homes. It allows you to rent a property while gradually working toward qualifying for a mortgage to buy it later on.

But rent-to-own homes only make up a small percentage of the real estate market and are not as widely available as traditional rentals. Finding legitimate, affordable rent-to-own home listings near you can prove to be quite difficult if you don't know where to look.

How to find legitimate rent-to-own homes near me

Finding a rent-to-own home can be challenging, as the number of available listings varies quite a bit depending on your location and local market conditions.

We recommend starting your search by contacting a real estate agent to ensure your home fits your needs. Still, you’ve likely got a few options in help finding a rent-to-own home. Here are your top options.

Hire a real estate estate agent experienced with rent-to-own

Realtors have access to the multiple listing service (MLS) and can help connect you with landlords and rent-to-own companies to view homes in-person. Experienced, connected realtors may also have access to listings that are "coming soon," so you may be able to view potential options that are not advertised, giving you a leg up over other buyers.

Good agents will provide support as you search for and compare your options. They can walk you through each contract's terms and conditions, show you homes in person, and help you understand any potential risks with each home.

How to find a rent-to-own realtor

Finding the right realtor to help you search for a rent-to-own property can be difficult. But the process is much easier when using an agent matching service like Semya-Moya or Ideal Agent.

» LEARN: How to find a real estate agent that's right for you

Work with a rent-to-own company

Many rent-to-own companies purchase properties and then lease them back to tenants, with the option to buy later. This can be a good option for people who want to live in a specific house but don't qualify for a mortgage right away.

Here are a few key considerations when comparing rent-to-own companies.

Available markets

Some rent-to-own companies only operate in certain regions, so make sure to check if the company serves your area before reaching out to them. You can usually find a company's list of available markets on its website in the frequently asked questions (FAQ) section.

Minimum qualifications

Rent-to-own companies have varying, sometimes strict, requirements for qualifying. Factors such as your credit score and income are usually taken into consideration.

Eligible properties

Rent-to-own companies often only allow you to choose a renovated or move-in-ready home and don't allow fixer-uppers. Additionally, your options may be limited to single-family homes and townhouses, and may not include condos, duplexes, or multi-family properties.

Customer reviews

Many rent-to-own companies are newer and have not yet been thoroughly tested in the market, which can make it hard to compare them. A small number of negative reviews may not be a cause for concern, but it's worth paying attention to any recurring themes or issues.

Contract terms

The terms of rent-to-own agreements can vary widely between companies. This includes the length of the rental period, which can range from one year to several years, as well as the type of contract (lease option vs, lease–purchase agreements).

Search online and contact a homeowner directly

If you want to do some solo research before talking to a realtor, you can also search real estate listing websites for rent-to-own properties on your own. Websites like ZeroDown, HomeFinder, Hidden Listings, and Rent to Own Labs often advertise rent-to-own home listings.

Websites like Zillow and Redfin allow you to filter your search for rent-to-own homes, while Rent-to-Own Labs and Homefinder specialize in these listings. Simply enter your criteria and contact the homeowner or company directly for more details.

Tips for finding legit rent-to-own properties

💻 Research the seller or rent-to-own company

Before committing to a rent-to-own home, aim to learn as much as you can about the owner or company. Here are a few steps you can take to make a more informed decision:

1. Verify that the seller is the actual owner of the property. View the home's ownership information from its tax records on a local county or city website.
2. Google online reviews. Check out the rent-to-own company or property manager reviews to get a better idea of their customer service. Websites like TrustPilot and the Better Business Bureau (BBB) can be helpful resources for finding and comparing customer reviews.
3. Search for customer complaints. Similarly, it's smart to see how many BBB complaints a company has and if the complaints have been resolved.

In addition, find out why the seller is offering the home as a rent-to-own instead of selling it. For example, the homeowner might want to rent the home before selling it, or they may be having difficulty selling and think this will help. Knowing their reasons can help you during negotiations.

🔎 Watch out for overpriced (or underpriced) properties

Be aware of the potential for rent-to-own scams and be on the lookout for warning signs. Here are a few questions to ask yourself to help evaluate a listing's legitimacy:

• Is the home’s listed price realistic, and is there a reason it’s significantly lower or higher than comparable properties in your area?
• Does the cost breakdown for renting and eventually purchasing the home include high up-front fees? Are these fees justified and explained clearly?
• What’s the home’s condition? Will it require a lot of maintenance and repairs after you move in, and will you be responsible for covering those costs?

The homeowner or rent-to-own company should be able to answer these questions clearly and promptly.

Why trust us

The Semya-Moya team spent dozens of hours researching the ins and outs of rent-to-own programs to create this comprehensive guide. We thoroughly examined agreements and consulted with industry experts to bring you the most accurate and reliable information.

It's our opinion that the best way to find a rent-to-own home is by working with an experienced real estate agent. They have the knowledge and resources to help you find the right home for you quickly and efficiently. The benefits of working with a realtor far outweigh any potential downsides (which are minimal).

Rent-to-own homes can be a good housing option for people who want to buy a home, but are unable to qualify for a mortgage. However, it's important to be aware that not all rent-to-own programs are legitimate or cost-effective. Consult with a local realtor or a real estate attorney for more specific, localized guidance.

The post How to Find Rent-to-Own Homes Near Me (2023 Guide) appeared first on Semya-Moya.

Rent-to-own programs (also called lease-to-own) let you pay rent to live in a home for a set period of time. At the end of your lease period, you can buy the house from your landlord at an agreed-upon price.

If you're struggling with mortgage approval due to poor credit, low income, or lack of down payment funds, rent-to-own programs claim to put you on the path to homeownership before you're ready to make a commitment.

The agreements can also have many nuances, so it's crucial to fully understand the terms and conditions of a contract before signing. We recommend you seek advice from a realtor, real estate attorney, or financial adviser.

How does rent-to-own work?

You can come to a rent-to-own agreement with companies or individual landlords. The specific terms will vary by provider, but the process typically goes like this:

1. Find the house.
2. Sign the contract.
3. Rent the home and start saving for the purchase.
4. Buy the house or move out.

A realtor can help you evaluate your options and determine which one has the best terms for you. Clever can match you with an experienced local buyer's agent for assistance.

Choosing an eligible home

You can search for listings with the help of a local realtor or rent-to-own company, such as Divvy Homes. Consider if you want to live in a specific house or a certain neighborhood or district. Rent-to-own companies typically only allow you to choose single-family homes and townhouses, and they may not allow condos, new construction, or homes in flood zones.

Rent-to-own contracts

There are two types of rent-to-own contracts: lease option and lease–purchase. The contract outlines your "option fee" (buy-in price), your monthly rent payments, and the home's future purchase price and down payment. You can work with your agent to negotiate these terms to your advantage.

Before signing the contract, make sure you fully understand its terms and conditions, with the guidance of a real estate professional.

Who pays property taxes in rent-to-own agreements?

Whoever legally owns the property pays the taxes on it. It comes down to when the property ownership transfers to the tenant: after the lease period, or at signing.

In typical rent-to-own agreements, the landlord or rent-to-own company covers the property taxes during the lease period, after which the renter can buy the home and take over ownership.

However, the IRS considers some rent-to-own agreements as "installment sales," so ownership transfers when the agreement is executed. In these cases, the renter is often considered the owner during the leasing period and is responsible for property taxes (and other potential expenses).

Move in and start saving

Generally speaking, your monthly rent will be higher than with a traditional rental because part of that payment (typically 10–25%) will go toward funding your future down payment. For example, a home with a monthly rent of $2,000 may actually cost you $2,200 to $2,500 to account for built-in savings.

During your rental period, you can take steps to build your credit score, improve your finances, and get a feel for the property you're in.

» SEE: How you can save for a down payment with a traditional rental

Exit the agreement: Buy the house or move out

If you decide to buy the house at the end of your lease, you must get mortgage preapproval and then complete the purchase with the help of your realtor or the rent-to-own company.

If you choose NOT to buy the home or you still don't qualify for a mortgage, you'll have to move out. You may owe a termination fee (up to 3% of the house price) and may lose some or all of your down payment savings.

Who do rent-to-own homes work best for?

"Rent-to-own can offer a powerful alternative for achieving some of the stability of homeownership before people are financially ready to buy, or know where they want to live," says Michelle Boyd, a housing policy expert and chief strategy officer at Terner Housing Innovation Labs.

👍 The ideal candidates for rent-to-own are people who…

• Have a plan to improve credit scores and finances — if your current credit score disqualifies you from getting a mortgage but you expect it to get better in the future.
• Need time to save up for a down payment — if you can afford monthly payments but don't have the thousands of dollars in down payment funds required.
• Want to live in a specific house, neighborhood, or city — for example, if you want to move into a certain school district sooner rather than later.

Who should avoid it

👎 You might want to avoid rent-to-own programs if you don't think you'll qualify for financing in the future — or, alternatively, if you can qualify for a mortgage right now.

We think most aspiring homeowners are better off continuing to rent or taking out a traditional mortgage. Because rent-to-own homes require a big commitment and aren't nearly as flexible as traditional rentals, they're just not suitable for everyone.

» JUMP: Best rent-to-own alternatives

Since rent-to-own agreements often come with higher rent payments than traditional rentals. If you're not confident in your ability to qualify for a mortgage — maybe because of a low credit score or limited credit history — then you should avoid these programs. Boyd says, "It's best to explore other options such as saving for a down payment, improving your credit score, or looking into affordable housing programs."

Making the most of a rent-to-own home also means committing to a property, especially because some programs charge high termination fees if you don't end up buying the home. A job transfer, family illness, or other unpredictable circumstances can cause you to relocate.

"The actual success rate or conversion rate for some rent-to-own companies is quite low, often far below 50%," Boyd says. So if you anticipate moving within a few years or you're not prepared to forfeit all that money, sinking your funds into this kind of agreement isn't worth it.

Finally, if you already have the means to qualify for traditional financing (i.e., a mortgage), you can skip the "rent" and jump right into the "to own" part of your journey. It'll cost you much less in the long run.

Pros and cons of rent-to-own

Rent-to-own home alternatives

Rent-to-own programs aren't a good fit for everyone. Here are some other options to consider when looking for a home.

How do I find rent-to-own homes near me?

Hire a local realtor

A real estate agent can help you find and evaluate legitimate rent-to-own listings, Negotiate the terms of the contract, and offer guidance throughout the process — including helping you avoid scams.

If you're ready to start your rent-to-own journey, Clever can connect you with a top-rated local buyer's agent who can help you find the best listings. Don't miss out on this chance to secure your dream home. Contact us today to get started!

Work with a rent-to-own company

Several local and national real estate companies offer rent-to-own programs, in which they buy the house up front and allow you to rent it from them for a set period of time.

However, not all rent-to-own companies are reputable or legitimate, and some programs are deceptively expensive. Here are a few well-known companies:

• Divvy Homes
• Trio
• Home Partners
• Landis Technologies

Search online

If you want to do some solo research before talking to a realtor, you can also search real estate listing websites for rent-to-own properties on your own. Websites like ZeroDown, HomeFinder, Hidden Listings, and Rent to Own Labs often advertise rent-to-own home listings.

Bottom line

A rent-to-own agreement could make sense in specific circumstances where your financial options are limited. But we recommend exploring other paths first, like low-down payment mortgages and federal or state assistance programs, because rent-to-own agreements are complicated and often far more costly than advertised.

You can also keep renting and put the extra money you would have paid a purchase agreement into a high-yield savings account. This way, in 3–5 years, you can have more money saved up and a better chance at a mortgage.

It's best to consult with a local real estate agent, attorney, or financial adviser before moving forward.

FAQs

Why trust us

Our team at Clever dedicated several weeks to learning the ins and outs of rent-to-own home programs to create this comprehensive guide. We studied contract agreements and sought the expertise of industry leaders, including the heads of rent-to-own companies.

Our experts

• Marjorie Scholtz, the CEO of Verbhouse, a rent-to-own company that aims to provide affordable home financing options for low and middle-income workers in high-cost housing markets. Marjorie is also a licensed real estate professional and previously worked as a co-founder and CEO of Stangl Advisors, helping people navigate loan modifications, short sales, and foreclosure alternatives.
• Michelle Boyd, a housing policy expert who works with Terner Center, a nonprofit organization dedicated to making housing more affordable and fair for consumers. Boyd also works with Terner Labs, a nonprofit affiliate that leverages technology to improve housing affordability and sustainability. She has been involved in supporting 17 early-stage companies over the past four years, with a focus on real estate development and making homeownership more accessible. Recently, Michelle worked with TechEquity to write "Rent-to-Own: The American Dream."
• Bruce Mohr, a senior investment adviser and credit consultant with FairCredit.com. Mohr has 15 years of experience in the investment advisory business and works with clients on achieving creditworthiness and financial stability.

About the authors

Steve Nicastro is a real estate professional and personal finance writer based in South Carolina. He has first-hand experience with rent-to-own homes, as he has helped potential home buyers evaluate rent-to-own listings and programs.

He believes working with a seasoned buyer's agent can greatly improve your search for a rent-to-own home. These agents will use their access to the multiple listing service (MLS), industry connections, and local knowledge of rent-to-own companies to help you find the best housing options in your area. They can also assist with understanding and negotiating rent-to-own agreements and ensure that your interests are protected during the process.

Amy Beardsley is a content writer at Semya-Moya. She has expertise in writing about real estate, insurance, and technology, and has worked with various reputable brands, including NerdWallet, Robinhood, LendingTree, Engel & Völkers, Opulence International Realty, Insurify, Legal & General, and NEXT Insurance. Her industry experience brings valuable insights to her writing and helps clients with their content strategy.

The post How Do Rent-to-Own Homes Work? appeared first on Semya-Moya.