Are you close to being able to buy a home but aren’t quite ready? Did you just move to Colorado’s Front Range metro areas and aren’t sure where you want to live? Do you need to rent right now but really want to buy a home in a couple years? Home Partners’ Lease with a Right to Purchase Program may be right for you!
Home Partners of America is a great program for those looking to rent a single family home but are just not quite ready buy. Whether you need more time to qualify for a traditional mortgage or you like the idea of trying before you buy, this program has helped thousands of renters move into being Homeowners throughout the U.S! And one of the best things about this program is there is NO COMMITMENT TO PURCHASE. You can also treat this program just like a standard rental where at the end of your lease you get your security deposit back and move out. So if you end up not liking the home, you can simply use your rental period as time to find your perfect home. No penalties for not purchasing!
Renting a home is done in 5 easy steps: (More details on each below)
- Applying – you must apply and get qualified for a monthly rent amount.
- Searching – we set you up on e-alerts showing you all properties that meet your criteria
- Submitting – once you’ve chosen a home, you will receive the lease agreement with your anticipated terms. After signing, Home Partners will create a strong cash offer for the home. Once our offer is accepted, you will owe the security deposit within 2 days.
- Transaction – This is more of a waiting game for you. They do need to purchase the home so you do need to wait for that transaction to complete and for them to make your home move-in ready. This process can take 5-6 weeks from when you submitted the home.
- Move-In – You will owe the first months rent 3 days prior to move in. The property management company will contact you to set the time for you to receive your keys!
- Right to Purchase – Along with receiving your lease agreement, you will also receive your Right to Purchase estimates. This will list out the anticipated purchase price for 1-5 years, along with how they are calculating the fees. (See below for more information on your Right to Purchase).
The application is simple and you can perform at home, or I’d be more than happy to meet with you and walk you through the application process. There is a $30 non-refundable application fee, but the great thing is with Home Partners, is that you can then shop for homes without having to pay an application fee at every home you’re interested in!
I always encourage applicants to use all household incomes when applying, and apply for the most amount possible. We can always stick within your budget when shopping, but it is hard to raise that budget, even if you are $50 short after you are approved.
Pre-Qualifying Criteria: In order to qualify, applicants will need to show at least a 580 credit score, $55,000 in household income, and you must have the ability to put twice the monthly rent down as a refundable security deposit. However, Home Partners doesn’t focus exclusively on your credit score. The full credit profile of your entire household is taken into account when they review your application to the Home Partners program.
When you apply, you will need to provide proof of income for your application.
- If you are employed traditionally (hourly, salaried, commissioned), you will need to upload your two most recent pay stubs.
- If you are self employed, you will be required to upload your most recent tax return, and two most personal or business recent bank statements.
FINDING A HOME
You have a couple ways to find a home:
1. As your agent, I will create a customized e-alert of the location and home criteria you’ve given me, and send you a daily email with properties. In today’s market homes go FAST! But they also come on the market fast, so my alerts will ensure you stay on top of the latest homes to hit the market! The first email will have every home currently on the market that meets your criteria. The following emails will update you on changes to those homes, and new properties that have come on the market since the previous email. You will also be able to favorite homes which will notify me of your interest, and I will then pre-qualify them to make sure they will work within your budget, and also qualify for the program.
2. You can also search Home Partners website directly at: homepartners.com/find-a-home. Through their website, you will be able to search by rent or list price amount, as well as the other typical home search criteria. While this option is great as it shows you the rental price up-front, their website often is not updated fast enough for this market. So occasionally there will be homes listed there that are not available.
Your initial lease is for one year, so your financial commitment is only for one year. Your lease is renewable every year for up to five, one‐year periods, and you have the right to notify Home Partners if you don’t want to renew the lease by giving them 60 days notice. Your full security deposit will be returned if you decide to not renew your lease, and if you have been in full compliance with the lease terms. Or, if you decide to buy, you can roll your security deposit into the down payment of the home.
RIGHT TO PURCHASE AGREEMENT
Your Right to Purchase Agreement gives you the right to purchase the home you selected from Home Partners at a predetermined price for every year of your lease, as long as you have been in compliance with the Lease Agreement and other documents. You are under no obligation to buy the home from Home Partners and there is no penalty for not purchasing.
YOUR RIGHT TO PURCHASE PRICE
While your rent price will remain as stated in your lease agreement, your right to purchase price is only an estimate. There are many factors that go into this price, with the largest one being the amount the acquire the property for. They will typically submit a strong competitive offer, and if this is higher than the list price, your right to purchase price will reflect this increase as well.
To calculate your purchase price, Home Partners will take the purchase price they paid to acquire the property, and add appreciation to that price (currently 5.5% in Colorado). The purchase price will also include their closing costs, HOA transfer fees (if applicable), make ready costs (costs they incur to make your home safe and livable prior to move-in), and they also include a repair and maintenance reserve. When you sign your lease agreement, you will get their Right to Purchase price that will reflect the highest amount you will pay for the home should you decide to purchase it. On average, this is typically closer to 7% of the purchase price of the home. However, if they do not have to repair or replace anything, they acquire the home for less, or there are no or minimal maintenance requests during your lease, then your Right to Purchase price will decrease accordingly. They just want you to know the maximum you will pay, but it often does go down in most cases.
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Unlike a standard lease agreement, you will have renewal options providing five years of rent certainty and the Right to Purchase price established at the time you enter the Right to Purchase Agreement. This locks in the price of rent and the purchase price, no matter what the market or future appraisal value shows! For example, if your first year Right to Purchase price is $400,000 for your home, but the home appreciates to $450k in that year, you will buy your home with $50k in instant equity, and not pay more due to competition!
You select your home that you want to live in from those eligible and available for sale in communities Home Partners serves – and lucky for you, their service area is MOST communities along Colorado’s Front Range. This opens you up to potentially hundreds of more homes than are likely listed only for rent.
Another great advantage is having a property management company with experience. You do not need to worry about waking up the private landlord in the middle of the night, or a landlord that doesn’t respond for days, or a manager who takes vacations. The property management company will be there for you 24/7!
And you get my help throughout the process, at absolutely no cost to you! I am a licensed real estate agent, who will help you search for homes and guide you through the entire process. As soon as you apply I will be emailing you a list of all the properties that are for sale that meet your criteria. I typically suggest you choose from the 3-5 best homes you see, and then we go see them! You choose one and I will submit that to Home Partners for approval (which is typically less than 24 hours!). I will be there for you throughout this process to answer any questions on the home for you and update you along the way.
I wouldn’t be transparent if I didn’t mention what past clients have felt has been some of the disadvantages of the program. The key issue people have is that you will need to wait 5-6 weeks after we go under contract with the home before you are able to move in. Home Partners’ is buying the home, so we still have to go through the home purchase transaction which typically takes 4 weeks. They then need to make any repairs and make the home move-in ready for you which can take the additional 1-2 weeks.
You will also owe twice the monthly rent as a refundable security deposit. This is because Home Partners is making a cash offer on the home, so they would like to make sure their large investment is protected. As long as you satisfy all the terms of the lease, you will get the full security deposit back! Or, if you decide to purchase, the security deposit can also be rolled into the downpayment for the home. The security deposit is due upon Home Partners submitting an offer on the home. This is to make sure you don’t back out, as they are then under contract to purchase the home. You will not owe your first months rent until roughly 5-6 weeks later, 3-days prior to moving in.
Home Partners of America does have to go through the regular purchase transaction of buying the home you would like to rent. This means that there are chances the closing date, and thus your move-in date, could change due to unforeseen snags during the transaction. Or the deal can even fall through all together for various reasons, resulting in you not being able to move in to the home you’ve chosen. While these circumstances are not common, delays and terminations can happen, and therefor a plan should be in place to be able to extend your current living situation in the event this scenario does occur.
And lastly, some do feel that their Right to Purchase fees are expensive. And while they can seem like that at face value, at this current time, you need to look into what that same home will likely sell for at the time you plan on purchasing the home. You can expect to see that the Right to Purchase price and all associated fees for the first year to be around 7% of the purchase price of the home. However, as mentioned above, this is a high estimate and will likely be lower. If the maintenance reserves and repair costs are not needed, the purchase price will be reduced accordingly. And most importantly, they are ONLY using a appreciation value of 5.5% right now in the Front Range! If you have paid attention to the market in the past couple of years, it has been above 15% in most of Colorado’s front range markets. So even though those costs may seem high by today’s standards, by the time you are ready to purchase the home, you are more than likely going to be purchasing it for less than market value, getting instant equity! And you will be able to purchase the home without competition!
MOVING FROM OUT OF STATE? READ THISThe Home Partners of America rental program can be a great option for those moving to Colorado and want to rent in order to get to know the area prior to buying! And if you end up liking the home and area you rent in, you have the option to stay put and buy the home! So you can then relax knowing you do not have to move again. But it’s also nice to know you are under no obligation to stay in the home beyond your lease, and that there is no commitment to buy it.
However, for my out of state clients, this program does have some unique challenges. Most of those challenges are listed above, but I want to specifically discuss these hurdles here from the perspective of a relocation client, and also discuss how to best navigate around them.
The largest hurdle is selecting a property, as Home Partners does require you to physically view the property and both you and I have to sign an affidavit that you have done so. What I do suggest is that we plan a time where you can visit; and the best days are Thursdays through Sundays as that is when the most homes are on the active market. However, since I cannot guarantee that you can rent the first home you select, it is often wise to schedule at least two visits to the area, or stay here through two weekends. Due to the strong sellers market, most sellers will collect offers throughout the weekend, and then choose the winning offer on Monday or Tuesday. This unfortunately only then allows Home Partners of America the ability to put in one offer per week. So this is why I recommend you plan on at least two weekends in the area. In the event our offer on the property does not win, you will then need to see and choose another property. And since most homes sell in one weekend, most other homes you saw the first weekend, will be sold by the time we are notified that our offer was not accepted.
Another hurdle for my relocation clients is the move-in date. With this program, the move-in date is typically 5-6 weeks after Home Partners goes under contract with the property you select. In order to extend this date, the seller has to agree to extend the closing, which is very unlikely in this market. For us to move up the date, all things throughout the transaction need to go very smoothly and all parties need to agree. The soonest move in date that is likely will be 3-4 weeks from the day of the contract. There can also be delays due to unforeseen circumstances that occur during the transaction. While rare, a delay that could push the closing date back (typically only a day or two, but can be up to a week or longer), which would then push your move-in date back. So to avoid a circumstance where my client is homeless for short period of time, I always also suggest they have a flexible move-in date or they have a contingency plan in place to have accommodations in the event their move-in date is changed.
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Information on Home Partners’ and Cels Homes Real Estate LLC website’s are not guaranteed, are provided exclusively for user’s personal, non-commercial use and may not be used for any purpose other than to identify prospective properties in which users may be interested. Home Partners is not a mortgage company, does not have any obligation to provide and does not provide financing and cannot guarantee or in any way assure that a resident will be able to obtain a mortgage if and when he/she wishes to exercise the Right to Purchase.
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