What is a rent to own home?
- A rent to own home is a home that you rent for a specified period of time and at the end, you have the option of purchasing the home.
- During the time you are renting, a portion of your monthly payments are credited towards the final purchase price of the home.
- At the beginning of rhte program, you are required to make an initial upfront option payment which allows you to purchase the home at the end of the program. This is traditionally less than what a bank requires.
- You can move in the home right away and call it your own.
Who's the best candidate for a rent to own home?
- A rent to own home is for those people who cannot get lending the traditional way from a bank or a mortgage broker.
- They make good income, but they either have hit a bump in their credit or they do not have enough of a downpayment.
- They understand the value of owning their own home.
All rent to own programs typically have the same concept. The difference is that there are three main variables:
1) The upfront payment option needed
2) The amount of credits each month
3) The type of home
Understanding each one and how it affects you during the program is essential, otherwise you may be taken advantage of.
The upfront option payment is typically between 2-4% of the current asking price of the home. Typical monthly credits range from 10%-20% of the actual monthly payments. The home itself, should be in a good area with good potential for appreciation. It should also be well maintained with recent upgrades to windows, roofing and furnaces.
You must also understand what other payment responsibilities you may have. Typical rent to own homes also have the rent to own buyer responsible for repairs under a certain amount, maintanence fess (if in a condo or a townhouse), as well as contents insurance to insure personal belongings. The property tax and property insurance are usually taken care of by the landlord.
During the program, make sure you are getting assistance in determining if you qualify for the home at the end of the program. If you cannot qualify, rent to own options usually do not refund any of the money you have already paid. The landlord may revise the program, but be aware of the different scenarios that can happen at the end of the program.
As with any major step, doing your due diligence is a critical part. Understand what you're getting into now and how it will affect you in the future.
A rent to own home could be your way towards home ownership.