When buying a home using the rent to own method, you are renting as you normally would with a traditional home.
This is the same as any other house you have rented in the past. The main difference is, you also have the option to purchase the house within a certain time-frame.
Basically you find a home that you want to buy, but instead of buying it right away you simply rent the house.
While you are renting you will have time to save money, improve your credit, decide if the house is actually right for you, or do anything else that kept you from buying to begin with.
If you are looking to rent to own because you are currently unable to qualify for a mortgage, it’s important to determine how long it will take you to eventually qualify for a loan.
We will touch on qualifying in later videos where we will also help you to easily avoid mistakes like agreeing to purchase a house within 10 months and later finding out that it will take you 24 months to become qualified for your mortgage.
Rent To Own Home Details
Now that you understand how rent to own works. let’s discuss some more details that make this different from houses you have rented in the past.
Similar to an upfront deposit when you rent a house, you will pay a fee. This fee is commonly referred to as an option fee or option deposit.
It is important to understand that this fee varies from seller to seller. Some only require an upfront fee equal to your rent, while others request 10, 15, or even 20% of the sales price. Don’t walk away from those high fees….run!
Another common component of a rent to own is the rent credit. This is the amount of rent that would go toward your purchase price if you buy the home. This credit can be anywhere from nothing at all to 50% or even 100% of your rent.
Along with signing your normal rental agreement you will also sign something called an option agreement. This will contain some important information like the price you agree to pay for the home if you decide to move forward with the purchase. Also listed is the time-frame for you to purchase the home, the amount of your rent credits, the upfront option fee, and a few other details we will cover later.