Like so many people, Kris Weber, 37, never imagined she'd be in this prickly place at this time in her life.
Five years ago, the dental office manager was married and living in a seven-bedroom, two-bath family home in Coon Rapids, Minn., that she and her husband had bought from his parents for about $260,000. His three nephews and a niece lived with them on and off. Between their two jobs, they paid their bills and had a little left over for the movies and trips to the Minnesota Zoo.
Weber is getting divorced, the house is on the brink of foreclosure and she has downsized considerably, living with her dog and cat in a two-bedroom, one-bath twin home in Anoka, Minn.
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But she's not renting. She's “renting-to-own,” an increasingly popular option for people such as Weber who, because of a shaky economy coupled with what she calls her own poor financial choices, no longer qualify for a mortgage.
“I've lived the apartment life, and I just really didn't care for it,” Weber said. “You have people above you, people below you.”
She heard about something called “rent-to-own,” typed the words into Google and, bingo, up popped RP Management with a listing for a small townhouse tucked into a woodsy corner of Anoka just five minutes from her office. Besides her monthly payment of $1,300 (which includes a $50 pet fee), she squeaked out $2,000 for a down payment, which she will forfeit if she doesn't end up buying. Her plan is to rent for two years, chip away at her credit-card bills, then buy the place. “I figure if I give it two years, I'll be where I need to be.”
Rent-to-own, also called buying on a contract-for-deed, has been around for years, but it's “really hot now,” said RP Management President David Holt. He said that's particularly true for people “who are used to owning or who would love to own a house, but can't get financing due to the tightening of the credit market.”
The option can also be attractive to homebuilders stuck with inventory, as well as homeowners facing a job transfer or those otherwise stuck with two mortgages for a while. Holt made homebuilder and developer Mike Torkelson's day when he matched him up with Weber.
“I just wanted to cover the payments,” said Torkelson, who is also trying to move three homes he built on spec. “Plus, anytime you can give someone the option to own, there's a feeling of pride.”
Starting over wasn't in Weber's plans, but she sees how easily it can happen.
She attended St. Cloud State University for two years, then took the full-time dental-office job, where she has worked since 1991. She married six years ago.
“We lived paycheck to paycheck, and that was part of our problem,” Weber says. The couple racked up enormous credit-card bills and didn't save. About three years ago, she thought, “This is not going right.”
Then things got worse. Her husband quit his job to go back to school in Arizona. Divorce proceedings followed. There was no way she could keep up with their $3,100 monthly mortgage payments.
“I talked to a Realtor who told me, ‘You can put the house on the market, but you're not going to get what you owe,'” she said. “The minimum loss if it sold was $50,000 or $60,000.”
She's waiting to learn whether the bank will foreclose on the house.
Downsizing was surprisingly therapeutic for Weber.
She held onto a few keepsakes from her marriage, such as tablecloths and photographs, but gave most of her possessions away. She's relieved that she no longer has to keep up huge yards or “lug a vacuum cleaner up and down three levels.”
She's carefully budgeting, paying down her debts and planning to start saving in a year or two. For now, her mind is on rebuilding her credit and her life.