There are many obstacles that hold people back from buying a house conventionally. Some people struggle with saving up enough for a decent down payment. Some people have a struggling financial history with low credit scores or fickle employment records. Others might find that banks favor traditional employment over self-employment, at least for the first couple of years. Home ownership could still be accessible. Choosing a rent to own agreement strikes a comfortable compromise for those ready to settle down in their own place.
Rent to Own Contracts
The rent to own agreement requires two separate contracts. The first contract would be similar to any traditional rental agreement or lease. A monthly price is set, along with the life span of the lease. Rent to own leases will usually last between one to three years, however long the renter feels he needs before he can qualify for a mortgage. Alternative time spans can be worked out between the lessees and the owner.
The second contact is a lease purchase agreement. The lessee and the owner will agree on a price to purchase the house. If the lessee is able to qualify for a mortgage in the span of his lease, he can purchase the house for the agreed upon amount. The seller can not raise this price or sell the house to anyone else, as long as the renter abides by their contract.
There are many other details that can be worked into a rent to own contract. Sometimes the owner will require that a small deposit be made before the renters can move in. This will go towards the down payment on the house when the renter purchases it. If the purchase is not made before the lease ends, the owner keeps the entire deposit. Some rent to own agreements will also section off a portion of the rent to contribute to the renter's future down payment.
How Rent to Own Housing Benefits the Owner
Property owners who are struggling with selling a home could benefit from rent to own agreements. As with conventional renting, the mortgage will be covered by their renters. Meanwhile, they will still be enjoying the tax benefits from the house. Sellers who choose to rent to own might feel more secure knowing that their renters are in it for the long haul. They will have less worries about their tenants moving on and leaving them in the lurch.
Many rent to own contracts require that the house be sold as is. This means the tenants cannot trash the house and then expect the owners to fix their mess before they purchase the house. Sellers typically require that tenants take care of all maintenance and repairs during their stay, relieving owners of one of the most expensive and troublesome parts of renting a home.
Before Signing the Rent to Own Lease
Setting up a meeting with a financial advisor is crucial before signing any contracts. Renting to own might not require that the buyers be qualified for a loan right away, but eventually taking out a mortgage will be inevitable. Finance professionals can review a buyer's current standing, give individual advice about how to qualify for a loan, and provide steps on what to do next in the journey towards home ownership.
Kristin Wood - K. Wood is a freelance writer from the Southeast who specializes in content about education, health, business, home management, and ...
