Can I Buy a Home Using Rent to Own?

Roby V. Pagong asked:

You may be wondering how is it possible to rent and eventually own a house. How does this work? What makes the seller agree to this? Other terms for the rent to own purchase are lease to own home purchase and lease purchase. This is a transaction wherein the party leases the property with the option to purchase it in the future. However, there is a period specified for the purchase, it is usually set within three years or less. An agreed price is also set.

How does this work?

The buyer or in this case, the renter will pay the property owner a certain amount for option fee. This fee is paid to give the buyer the option to pursue or terminate a certain transaction. The amount depends on what the parties agreed, but usually, it is a small percentage of the agreed value of the estate.

In addition to the option fee, the borrower will also pay a rent premium. This amount is different from the monthly payment that the borrower pays for rent. However, this premium payment will be credited to the premium price. In the event that the renter fails to exercise the purchase option, he loses the option fee as well as the rent premium.

If you wish to engage in this kind of home purchase, be sure to check with your real estate lawyer. This is because the ruling for this transaction differs from one state to another. There may be general information about lease purchases but there is also significant specific information for each state.

Some points to remember:

You have to understand several things when buying a house using rent to own. One is that the value of the house and its rent is usually determined by the market. However, it is negotiable. If you are going to buy a house through this, make sure that you do your research first because buyers normally know more than you do and this can be to your disadvantage.

You have to be careful in taking long option periods. Although this can help you work on financing and credit repairing, this may cause you to lose your rent premiums if you are not able to exercise your purchase option. Most sellers would want to have shorter period for the option, however, their estates would not be sold if the
periods were too short.

This is a very good alternative to purchase a home especially if you need a lot of time to repair your credit. As mentioned earlier, the option period will usually take about three years. This is enough time for you to have your credit repaired. This is a good opportunity for those who cannot get an approved loan. However, you still have to be careful if you want to purchase a home through this arrangement. See to it that that you consider important things before choosing what property to lease to own. You have all the reasons to check the location, the condition of the house and other important aspects of purchasing a home.

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