2019 New Years Resolution: Homeownership
Make a goal when the clock strikes midnight. Write out your New Year's Resolutions to share with the family. Count 13 wishes on 13 grapes (representing the 12 months and one for good luck).
Whatever your New Year's tradition may be, you may have found yourself planning out a new home in 2019. According to Statista, 21 percent of Americans are choosing to buy a home as their New Year's resolution. Congratulations on the responsible goal!
You may not be ready to buy a home in January, but you've got a whole year to get there, right?
Unfortunately, 80 percent of New Year's Resolutions fail by the time February hits, according to clinical psychologist Joseph Luciano.
So, how can you keep your homebuying dreams alive and well throughout 2019? Make a BIG commitment!
Rent to Own: A Path to New Years Resolution Success
When you rent to own, you're technically still renting, but you've taken the first step to buying. While you don't need to come up with a full down payment, you are providing a small option payment (2-5 percent of the cost of the home).
That option payment is a way of backing yourself. You pay the fee to maintain the option to buy the home within the next 1-3 years (you set the time frame, but we both know you're aiming to get it done in 2019). Once you take the leap to purchase, the full option fee goes toward your down payment on the home.
The catch? If you don't buy the home the seller gets to keep the option fee.
This is a great way to keep yourself accountable for making your New Year's Resolution a reality! Plus, if you give yourself a three-year time frame, you can feel at ease that unexpected emergencies don't get in the way. While it's your plan to purchase this year, you'll get a full three-years in case the unexpected happens.
Don't worry about the long time frame. The cool thing about rent to own is: just because you sign a three-year lease, doesn't mean you're trapped for three years. Once you have the money you need and the contracts ready, you can close!
There's no need to wait for the end of the lease. You can close within a month of signing your lease-option or three years after.
How Does Rent to Own Work?
Beyond the option fee, you make monthly rent payments to the seller of the home. Just like you would in a normal rental situation. You're renting the property with the goal of owning.
Some buyers and sellers work out a rent credit system in which a portion of the rent paid goes into an escrow account with the option fee. If you go through with the purchase, you get all of the money in that account to use toward your down payment. Otherwise, the seller keeps it.
It's a great deal when you think about a typical landlord who keeps 100 percent of your rent payment.
The constant savings helps prepare you for making a down payment once you're ready to purchase a home. Consider it a forced savings plan that guides you closer and closer to home ownership.
Once the full lease term has passed, the seller has the option to sell the property to someone else. So, it's important to close on the property before the lease term ends.