How Does It Work?
Renting to own works exactly as it sounds. You pay your rent each month and at the end of a period of time, you have the option to buy the house. Each month of rent that you pay is income for the seller, while a portion of that rent goes toward a down payment to eventually purchase the home if you so desire.
Renting to own might be a great option if you don’t want to blow all of your savings on a down payment, or if your credit score isn’t quite where it needs to be to qualify for a traditional mortgage. Renting to own might also be a good option for those who may have lost a home in their past to a foreclosure. Here’s another scenario: Let’s say you want to live in a community with an awesome school district for your kids but you can’t swing the steep prices. Renting to own might be a great way to get a foothold without breaking the bank. One additional benefit is that you can lock in a price today and know how much you’ll pay for the property at the end of the lease term.
So What Are the Downsides?
Renting to own may be a bit more expensive than basic, garden-variety renting. Here’s why: Remember that part of your rent-to-own payment is devoted to the eventual down payment on the house. That may make your monthly payment larger than it would be if you weren’t renting to own.
Also, you need to check to make sure that there aren’t any back taxes or liens that the current owner has incurred, because you’ll be responsible for them. Just as you’ve heard “Buyer Beware”, it pays for rent-to-owners to beware as well.
Overall, most experts believe that renting to own is more complex than renting. If you’re going to pursue this option, do your homework and talk to an experienced real estate professional before you sign any contract.
If you need a place to start, try Rocket Homes. They’ll match you with top real estate agents in your area.
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