Buying a home requires a lot of homework.
Before even choosing a home, prospective buyers should determine a comfortable monthly mortgage payment and create a wish list of features they want.
Buyers should ask themselves a dizzying list of questions: What features do I want, and what features do I not want in a home? What neighborhood most appeals to me and the lifestyle I enjoy? What amenities are important to me that need to be within close proximity to the home?
Any buyer’s wish list can be limitless, but the biggest obstacle many potential homebuyers face revolves around the simple idea of economics: Can I afford it now?
Jason Waugh, the president and CEO of Berkshire Hathaway HomeServices Northwest Real Estate says the three primary barriers to home ownership for many folks since the severe market correction of 2008-2011 are lack of inventory, credit-related issues, and the stricter qualification criteria of today’s regulatory climate. They may see a home they like, but they’re not always ready or able to commit to a 30-year mortgage quite yet.
“But what if you gave folks the chance to ‘test drive’ a home before deciding to buy?” he asks.
To test out this theory, Berkshire Hathaway has endorsed the Chicago-based organization Home Partners of America (HPA), which, for the last two years, has bought homes for prospective homebuyers who cannot do so, or are still undecided about taking on a mortgage.
Here’s how it works. Once a potential homebuyer is lender-approved and chooses a home, HPA buys that home—with cash—and then rents the property to the homeowner for as long as five years.
Waugh says this gives the potential homebuyer the chance to test a home out while deciding whether the home is a good fit.
Each of those five years will be broken down into consecutive one-year leases, he says. “You have the opportunity to rent at a fixed price for five years, and for each of those years you’ll know exactly what you’ll be paying in rent, and what the purchase price will be during each of those five years should you exercise the right to buy.”
By enrolling in HPA’s program, potential homebuyers can pay rent in the home they want, while simultaneously saving for that home’s down payment.
And if those homebuyers change their minds? Waugh says they can simply walk away at the end of any of the one-year lease terms for whatever reason, just like a traditional rental agreement.
Right now, the program is still in its infancy, but Waugh says it provides an alternative and less burdensome path to home ownership for many qualifying buyers—especially those who are having a hard time coming up with the cash for that initial down payment, are repairing credit, or don’t want to commit to a mortgage because they just relocated to the area and are unsure about where they want to live.