How to Buy a House with No Money and Bad Credit

How to Buy a House with No Money and Bad Credit

Originally posted on February 19, 2020 @ 8:06 am

How to Buy a House with No Money and Bad Credit

Rent to own homes in Ontario present an incredible opportunity for individuals who wish to own a home but lack the lump sum amount or are held back by their poor credit score.

Buying a home is always at the top of most people’s wish list. This can be attributed to the sense of security that comes with owning a house. For most people, having their own home means not worrying about rent, which is, in itself, a powerful motivator to buy a home. Unfortunately, buying a home is an expensive undertaking that only a few people can comfortably afford. Considering today’s economy, owning a home is more of wishful thinking. But thanks to options like rent-to-own, many individuals are now capable of living their dreams as they get handed over the keys to their homes.

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Rent-to-own homes in Ontario allow individuals to own homes without the need to break the bank. This setup will enable you to live in a house in a beautiful neighborhood even when you aren’t just ready to buy it yet – or be in a good school zone when there are limited rental options. Rent-to-own homes are also a great choice when you are looking to fix your credit (which might take years) while living in a nice house.

Understanding rent to own


Rent to own is a situation where the homeowner turns over their house to you – as if you own it – except that you do not have a mortgage for it yet. Look at it this way. A home on a real estate site goes at 900 dollars a month, and the price is 250,000 dollars. Rent to own is going to need you to come up with some percentage, usually between 2.5-10% of the total cost to serve as a deposit. The deposit is non-refundable throughout your lease, but it allows you to exercise your purchase option at the end of the lease. The lease can be a year, two years, ten years, and so on, after which you can use your deposit as a down payment. Once the lease is over, you will already have foxed your credits core and be able to take out a loan to buy the house. This one-time fee that you pay the seller upfront is termed as option consideration or option money, and is what gives you the option to purchase the house by a specified time in the future,

Lease purchase and lease option

Rent-to-own contracts aren’t created equally – they vary in terms of their flexibility and customer-friendliness. That’s why it is essential to know your options to ensure you are getting one that matches your personal and budgetary preferences. In a nutshell, there are two kinds of contracts when renting to own: lease option, which allows you, but not mandates you, to purchase the house at the end of the lease, and the lease-purchase legally obliges you to buy the home when the lease expires. 

So, if you are seeking for flexibility of not buying the house at the end of the lease, then its best to make sure that your contract is the “lease option.” A lease purchase will ties you down, irrespective of whether you can afford to buy the home or not. If you are uncertain about whether your contract is a lease option or purchase lease, its best to have a lawyer review it beforehand, to avoid bottlenecks later on.

How to Buy a House with No Money and Bad Credit

Deciding the buying price

Rent to own homes, like other traditional homes, come in varying rates – but usually, they will cost higher because of the convenience. Your contract should, therefore, specify how and when the home’s buying price is determined. Sometimes, you may agree with the seller when you’ve signed the agreement, or decide to wait until the lease ends, based on the home’s current market price. If you are in the market where the prices are on the rise, it might be a good idea to lock in the purchase price upfront for the best rates.


Who is responsible for maintaining the property will depend on what the contract stipulates. If the contract specifies that it is the homebuyer’s responsibility to maintain the house, then you’ll need to do it. The good news is that sellers often take care of taxes, homeowner association fees, and insurance – but you’ll still need liability coverage as well as personal property to protect yourself against losses. Again, it’s important to have your lawyer explain everything in the contract for you to understand your responsibilities.

Last words

Although you are not buying the house right off the bat, it’s still important to be smart in your approach to ensure you understand what you are getting yourself into. Choose the right terms, get help, research contract, research the home, research the seller, and double-check that everything is clicking right.