For those who, for whatever reason, aren’t yet qualified to purchase a home, there are options.
One way to realize your dream of home ownership is through purchasing a home on a rent-to-own basis.
Here are some things you should know about this option:
Rent-to-own programs generally appeal to two types of people:
The first includes people who have a down payment, but also have credit challenges.
The second is the reverse, where potential buyers may have good credit and can qualify for a mortgage, but have little or no money to put down on a purchase.
Through the rent-to-own program, the potential buyer is allowed to pay rent to live in the home he or she wants to buy, according to terms established in a rent-to-own agreement.
A certain percentage of rent goes towards the purchase and, at the end of a specified period of time, the buyer theoretically will have enough to enable him or her to purchase the home.
The renter/buyer also can expect to pay some type of deposit, and at the end of the rental term he or she will either purchase the property using the deposit and rental credits, or forfeit the deposit and vacate the premises.
Rent-to-own may also offer a seller relief from a mortgage they can’t pay on a home they can’t sell.
Just as in a sale, the seller and the renter/buyer negotiate a sales price for the home and a term, usually three years.
As you can imagine, all parties will benefit from an ironclad contract, drawn up by lawyers experienced in this type of agreement.
As compared to a straight-forward property rental, there is definitely more of a risk in a rent-to-own situation.
Be sure you know what you’re getting into; talk to your mortgage professional about rent-to-own programs and see if they are right for you.