What can you do if you don’t have the cash or credit to buy a home right now but want to get in the market before the cost of buying goes higher? You can consider the rent to own market. While this market clearly isn’t as large as the traditional bank mortgage market, the rent to own market remains viable under all market conditions.
When you’re tired of handing over $1,200 or more per month in rent but you get nothing more in exchange for it than a roof over your head, it’s time you start looking at other options available to you. One of the best options when you have a limited down payment and/or less than a stellar credit rating is a rent to own home.
What Rent to Own Does for the Buyer
There are many options available to how you write a rent to own contract that creates a win-win scenario for both you and the seller. Yes, it’s going to cost you a little
rent to own
more to buy with a rent to own contract. However, at least you’re buying and no longer throwing rent money out the window every month.
Rent to own is a great option when you have some money saved that can pay for the purchase option but not enough for the full down payment. Ask the seller to apply the option payment towards the down payment when you exercise your option to buy. When you negotiate a portion of your monthly rent to also apply towards the down payment, you’ll have the full down payment in place in a year or two. That’s when you exercise your option to buy the house.
What Rent to Own Does for the Seller
As the seller of a rent to own home, you can expect a higher sales price to compensate you for not being able to offer the house for sale to anyone else while it is under the lease option agreement. The lease option fee also pays you for not being able to sell the house to someone else for a couple of years. Additionally, you have a serious buyer that will likely be able to complete the purchase if the contract is worded in a way that builds up his or her down payment.
If the deal doesn’t get completed, you’re still well compensated when you keep all of the above market rent that had a portion allocated towards the down payment and the original option payment. Whether the home sells or not, you’re well compensated as the seller when you make it available on a rent to own basis.
One thing you do want to do is set up a separate account to hold all monies that will potentially apply towards the down payment. While many think the rent to own option heavily favors the seller, this can be the buyer’s only option under today’s tight market conditions. It may cost the buyer a little more but at least he or she isn’t still throwing rent money out the window.