So What, Exactly, IS a Rent to Own Home - And When Is This The Best Option For Me?
So what's the big deal with Rent to Own homes? Some potential homeowners who are not able to purchase a home right away consider the "rent to own" route instead. A rent to own agreement is essentially a rental contract for the property which includes added stipulation that the renter can purchase the property at any point during their lease. This type of arrangement is beneficial for all renters. as it provides them the flexibility of a traditional rental with added protections they would not otherwise benefit from.
For example, in a conventional rental arrangement, if a landlord decided to sell the property midway through a tenant's lease period, that renter may find themselves having to find alternative housing arrangements much sooner than expected. In certain states, this could even be with very little notice whatsoever! Whereas in a Rent to Own arrangement, the owner can't sell the property partway through the agreement term (provided both parties have been living up to their end of the agreement), as it would infringe upon the rent to own tenant's contractual right to purchase said property at any time during their lease term.
Additionally, this is option is especially appealing to renters with bad credit who are unable to buy a home by any other means, as it provides an opportunity for home ownership. Furthermore, for renters who aren’t quite sure they really want to buy a home. It can also be quite beneficial for homeowners who are unable to make their monthly mortgage payments going forward as well, as it provides them an "out" - they get to escape with their credit intact and avoid an otherwise impending foreclosure.
Let's examine some prime examples of when opting for a Rent to Own arrangement would be an excellent idea.
When Your Credit is Bad
Potential homeowners with bad credit may find a rent to own situation may be exactly what they are looking for. Simply assume the existing - already underwritten - mortgage, and continue making payments. With this arrangement, no credit check is necessary, simply demonstrate the ability to pay. In order to do this, you can use pay stubs, bank statements, or even tax returns.
Homeowners with poor credit are often shafted by awful loan terms and high interest rates. Not to mention balloon payments and unrealistic down payment requirements. In these situations, it's definitely in the best interest of the renter to pursue a rent to own home arrangement.
That being said, the best thing you can do in this situation is STILL the most obvious, although the most challenging. Repair your credit!
One of the best ways to repair credit is to maintain good credit in the present and into the future. Most blemishes on credit reports are erased after a certain period of time. Renters who have poor credit can work on repaying their current debts in a timely fashion and with time their credit score will improve. During this time participating in a rent to own program allows the renter additional time to repair his credit and may also allow the renter to accumulate financial resources which will enable him to purchase the home when the lease period is over.
When You Just Aren’t Ready to Buy a Home
Some renters opt for a rent to own program when they aren’t quite sure they really want to own a home. In these types of agreements, renters are given the option of purchasing the home at the end of the agreement period but they are not obligated to purchase this home. This allows the renter to see what it is like to own a home without having to commit to homeownership.
Renters who are renting a home may learn a great deal about homeownership during the rental period. This may include information about maintaining the landscaping of the property and dealing with conflicts with neighbors. It may also entail caring for and maintaining a significantly larger domicile than most apartment renters have to maintain. Some renters are not quite sure they are ready to handle all of these issues and may use a rent to own agreement as a trial period to determine whether or not homeownership suits them.
So, In Conclusion, let's take a look at some examples of currently available Rent to Own homes - both on our Featured Listings Page and at our Sister Site. I'm sure you will come across some amazing opportunities!