You want to own your own home someday, but you don’t have the capital to make the purchase just yet. You’ve heard of rent-to-own programs and wonder if they could help you achieve your dreams without having to wait years before you can buy property. Here’s what you need to know about rent-to-own and whether it can be an option for you.
What Is Rent To Own?
Rent-to-own is a common term in real estate where an individual rents a property and has an option to purchase that property at a later date. To be more specific, rent-to-own properties are sold under lease option contracts. These contracts allow tenants (often with bad credit) to buy houses by paying a rent premium. In short, it’s perfect for individuals who would like to purchase a home but don’t have enough money for a down payment or steady income. Here’s how it works: Tenants pay their monthly rent as normal and then additional monthly premium overtime for buying their home.
How Does The Process Work?
The process for rent-to-own differs from state to state, but generally speaking, it starts with you completing an application and a credit check. If your credit score is high enough, you can move forward with finding a property through Realtors and builders (oftentimes they have their own rent-to-own programs). Once you’ve found your home, you sign a lease agreement, and then after 30 days, you’ll start making monthly payments that build equity in the home. Once your initial lease term is over, there are usually four more 1-year terms that follow, in which at any point during these periods you can buy your house outright. In some states though, tenants are given one opportunity to purchase their home within two years of signing a lease agreement.
What Are The Pros And Cons Of Rent To Own?
Rent-to-own (also called lease option or lease-purchase) can be a great choice for people who want a home but are concerned about falling property values. It allows you to buy a house before actually owning it, so you get all of the benefits of homeownership—you still pay less than renting and may even be able to deduct some rent from your taxes. If property values drop, you can simply turn in your keys and move on with no penalty. Unlike homeownership, there is little or no maintenance involved in rent-to-own properties, so if you don’t want that burden either—this could be an excellent option for you.
What Are Other Options For Homeownership In Today’s Market?
Rent-to-own is a viable option for those who are not ready to buy or qualify for a traditional loan. However, there are other options that can help you achieve homeownership sooner. For example, lease option agreements allow buyers and sellers to determine their homeownership status before they close on a home purchase. In rent-to-own situations, tenants pay rent and have an option (typically at no cost) of purchasing their property in one year or at some time in the future after meeting certain terms and conditions. In lease option agreements, you sign an agreement that allows you to live in a house for an agreed-upon period of time with your payments going toward down payment/rent credit towards your purchase when your lease is up.