Do you want to buy your very own home? Are you fed of renting? You want to buy a house but maybe you have a bad credit score or you can’t meet the required down payment? Maybe you have seen a really expensive house that you have set your sights on, a house that is way out of your budget. Well Rent to Own is the answer to your problems.
A Rent to Own is an agreement between you and the property owner, where a portion of the monthly rent you pay will go towards the down payment for the house. With Rent to Own, you will have the exclusive right to buy the house after the end of the term, at a pre-determined buying price. So the rent you pay goes for occupancy and for the initial deposit.
There are three main components in the Rent to Own agreement
The down-payment should be mutually agreed upon, by you and the owner. The owner then has to apply it to the agreed purchase price of the house. The amount is usually the first and last month’s rent-this payment is recognized by lending institutions for your right to buy. But this can vary according to the owner’s requirements.
This is the agreed upon sale price between you and the owner after certain duration passes. The fixed price benefits buyer not sellers. The seller has to sell at the fixed price even if the current valuation of the house is more. Buyers can take advantage of falling property prices and stringent credit regulations to find a home that is affordable.
Rent portion to go towards Equity
This amount is mutually agreed by you and the owner. When you pay a monthly rent, a portion of it goes towards the down payment for the property. The only disadvantage you have as a buyer is, if you don’t want to buy or you don’t qualify for a mortgage at the term end you will lose your down payment. As a potential buyer, you need to really think whether you will be able to buy the house at the end of the contract otherwise it can be a waste of money and time.
The purpose of a Rent to Own is to help you build up your credit score and down payment so that you can buy your very own dream home.