Rent to own homes perfect for credit-strapped buyers

Rent to own homes perfect for credit-strapped buyers

More buyers are looking for new homes and may be planning moves within the next few months, though experts say tight credit is holding back many more consumers. Rent to own homes can offer credit-strapped buyers the option of purchasing a new home even without perfect credit.

The latest data from the National Association of Realtors showed that pending home sales rose again in November, and the forward-looking indicator could bode well for home sales over the next few months. The NAR’s pending home sales index climbed 3.5 percent to a reading of 92.2 in November based on new home contracts signed that month. That was up from October’s downwardly revised reading of 89.1 and still 5 percent below November 2009’s reading of 97.

High levels of housing affordability – including low prices and high inventories – have been able to lure buyers who can afford to purchase a home. On the other hand, many more buyers would be able to purchase new homes if lenders eased up their credit standards, which have tightened to harsh levels as banks step up their efforts to minimize loss.

“Credit remains tight, but if lenders return to more normal, safe underwriting standards for creditworthy buyers, there would be a bigger boost to the housing market and spillover benefits for the broader economy,” explained Lawrence Yun, the NAR’s chief economist.

Tight credit standards are locking many buyers out of home loans. A recent analysis of home loan requests by Zillow.com revealed that borrowers with credit scores of 620 or below were unlikely to receive even a single quote from a lender, even if they offered a 15 to 25 percent down payment. According to myFICO.com, 29.3 percent of all Americans have scores that low.

“The irony here is that so many Americans can’t qualify for these low [mortgage] rates, or can’t qualify for a mortgage at all,” explained Zillow chief economist Stan Humphries.

Lease-to-buy homes can be a welcome homebuying option for many of these buyers, since they don’t carry the same credit restrictions as traditional loans. With more buyers getting in contact with rent-to-own homes, the overall real estate market could benefit.

Rent-to-own homes might also allow buyers to circumvent other challenges that might make mortgages less appealing. NAR president Ron Phipps recently spoke out against federal efforts to scale back the mortgage interest deduction, a significant tax break that often encourages consumers to buy a home.

Blog written and located at http://www.irenttoown.com/news/Market-Trends/Home-sales-rising-but-credit-remains-tight

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