What You Need to Know About the Rent-to-Own Process
It may be that you are tired of paying rent, but you can't afford to buy a new home yet. Sometimes, a landlord or property owner will agree to put part of the rent aside so you can eventually purchase the home.
Understanding Rent-to-Own Contracts
Instead of taking out a mortgage before you move into the home
, a rent-to-own contract allows you to move into the home right away. This will improve your credit score while part of your increased rent goes into a fund to contribute to the down payment, interest, and/ or principal payment. A rent-to-own situation is not identical to an owner-carry situation, but they do go hand-in-hand. These types of contracts can be tricky, so be sure that you have a clear understanding of the expectations by the property owner so there will not be problems later.
With a rent-to-own agreement
, you might not pay a down payment
right away, if at all, but option money
is involved. This is a fee that you will pay to the homeowner as an incentive for him or her to allow you the first option to buy the home when the time comes. Purchase price (principal), rent, and maintenance are all negotiable between buyers and sellers, regulated by the laws of the governing state. It is a good idea to have an attorney or banker take a look at the contract to make sure all is in order for the time when the owner allows you to buy the property.
A good candidate for rent-to-own contracts is someone who needs some time to build his/ her credit, wants to lock in a home
now, can afford the rent right away, and will be ready to make the purchase when the lease is up. It's important that all of this information is in the contract so that you will be assured that part of your monthly rent payment is going towards the eventual purchase of the new home