#1 – What rent-to-own means?
Many of us may not be familiar with this concept; we are used to either buy or rent a house/an apartment.
Many external factors will stop you from buying a house, such as a low credit score. But, a rent-to-own process takes you out from the despair.
Also known as lease to own, allows you to rent a place with an option to buy the house within a specific period ( just like a loan ). So you pay the rent, but a part of those payments will go toward a down payment.
Much simpler to explain, this will give you enough time to increase your credit score and funds.
Generally, the rent-to-own process favorites the landlord and not the renters.
#2 – What are the advantages of this process?
The best part of a rent-to-own process is that you can live in the chosen home before deciding if you want to buy it. It’s like you’re trying a new phone in a storefront and make the decision.
This process also helps buyers because the market price for that home would not increase.
For sellers, it’s a great chance to get rid of those signs placed in front of the house. ( ‘ House for sale! ‘ ). Landlords can finally be at peace because they no longer will have to make the inventory; renters will do everything to feel like home, even buying new furniture or redecorating.
#3 – What are the disadvantages of the rent-to-own procedure?
Wherever there are pros, cons exist too.
Firstly, if renters decide not to buy the house, the down payment won’t be reimbursed. However, this is a written rule in every buyer-seller contract, and it can’t be changed.
Secondly, the renter may never have a high credit score. Even if he decided to buy that house ( after the rent-to-own process ), he wouldn’t be qualified to get a loan.
#4 – Rent-to-own agreements.
If there are not tons of paperwork, it’s not official.
Rent-to-own agreements are quite challenging, besides the challenge of a normal rent or buy agreement. What actually happens?
When you agree to rent to own a home, you’ll have to sign both for the time you are a renter and your potential commitment to buy the house ( once you get that credit score ).
However, there are two types of agreements:
- Lease-option contracts – in this case, you have the option to buy the house at the end of your lease.
- Lease-purchase contracts – in this case, you are obligated to buy the house after the renting period.
#5 – How the cost is calculated for a rent-to-own house?
To determine a monthly payment ( the rent + a percentage for the down payment ), the renter will need to look for the interest rates and other fees that are paid in the buying process. The most reliable way to find out the monthly price is to use an online calculator – and there are tons!
The other way is to get in touch with the seller and its lawyer – most of the time, the seller can increase the whole price.