Category Archives for Rent To Own

What Is Rent to Own?

A rent to own agreement gives the buyer control of a property, not full ownership, with the ‘option’ to purchase the property at the end of the contract period. Essentially it is a contract to buy a property with an extended closing date. That way you, as the buyer, have time to save a down payment, clear up any credit issues, and to line up financing.

Typically, you, the buyer, will put down an option consideration, like a deposit for a rental, to secure your place as the future owner of the home. Then you’ll make monthly payments, and at any time during the option period, you are authorized to complete the transaction of the home.

3 Questions to Ask Yourself Before Renting to Own

A lease option can work out beautifully for you as the buyer if you walk into the arrangement with your eyes open. We want everyone to succeed in their dream of homeownership, so here are three questions you need to ask yourself before you decide that renting to own is for you.

1. Will You Qualify for a Mortgage Later?

Renting to own essentially pushes the purchase date out 12-36 months so that you have the time to save for a down payment, raise your credit, and line up financing.

So if you can’t qualify now, what is your plan to qualify in a couple years? If you need to repair your credit, have you spoken with a credit reparations company to help you with that? Do you have a savings account set aside for your down payment? Are you committed to make the necessary changes so that you can own your home in a couple years? When you have a plan in place, you’re much more likely to succeed.

2. Have You Done Proper Property Value Research

You are as responsible as the seller for agreeing to the purchase price. Educate yourself about the area, and ask the seller for comparables so that you know the agreed upon price is a good one.

The option is usually 1-3% of the agreed price paid upfront, and it is forfeited if you choose not to buy, so knowing that you’re locked into a good deal, with honorable people, will make you all the more motivated to make sure that, at the end of the option period, you are ready, willing, and able to follow through with the purchase.

3. Read the Contract

We recommend that you have an attorney read through the contract with you. We recommend consulting an attorney or going through the contract line by line with the seller and having them explain it to you because knowing what you’re agreeing to is essential to a successful outcome.

Renting to own is a fantastic option for many future homeowners, and we want to see you succeed – it’s why we do what we do – but the bottom line is that, like with anything else, you need to educate yourself on what you’re getting into. When you are knowledgeable, there is no need to worry or fear.

If you’re ready to explore renting to own for yourself, contact us and we’ll answer all your questions.

Why Renting to Own is a Smart Choice Today

Like all great agreements, renting to own is beneficial to both the seller and the buyer.

But, let’s take a look at the advantages for you as the buyer.

In a rent to own agreement, you, as the buyer, freeze the price on the home for a year or two in advance of when you’ve agreed to close on the purchase. Since most markets appreciate, you’re locking in a good deal with built in equity.

During your time as a tenant buyer, you’re making payments that contribute toward the down payment of the sales price. It’s like a built in savings account that you cannot touch.

You also have the ability to test drive the house, the neighborhood, the school system, etc, prior to buying. If it turns out you were wrong about the whole thing, renting to own is a lot less expensive than purchasing the house outright and finding out you’re stuck with it later.

The extended closing date allows you the time to clear up any credit issues, save down payment money, and get pre-qualified for a loan. When you meet with a mortgage broker you’ll understand the amount of debt you can shoulder each month and still be approved for a loan. You’ll also discuss down payments and loan types, making you a well informed future borrower.

Essentially, renting to own gives you the time to get your finances in order while you’re living in your dream home.

If you’re ready to see how this could work for you, contact us and we’ll answer all your questions.

What to Expect as a Tenant Buyer

Being a tenant buyer is different than being a renter. In a rent to own agreement, since you’re both a tenant and the future owner of the home, you’re expected take greater pride in the property and have greater responsibilities towards it, and you’re expected to uphold your duties as a good tenant as well.

While usually the mortgage, taxes, and large repairs are covered by the seller during the option period, you as the buyer are responsible for the maintenance and upkeep of your new home, just as you would be if you bought it outright.

As it is with a bank mortgage, you will be expected to make payments on time; if you don’t there can be financial consequences, such as forfeiting that month’s percentage of the rent that goes towards the purchase of the home.

Being a tenant buyer is sort of like a bridge loan between renting and homeownership. You have the obligations of being a good tenant, but you’re also held to a higher standard that you would be held to as the owner of the property.

Renting to own gives you the future opportunity of homeownership while grooming you for the responsibilities that come with it.