Rent To Own Houses

Rent To Own Houses is a still little known method that prospective homebuyers can use to obtain a home, possibly of their choosing and by living in it and paying their rent on time actually improve their credit scores. Some providers also use the term lease own homes but the principle is the same. Here's how it works:

 A homeowner may offer their home for rent with an option to purchase. The rent it is offered for may be at or above the normal market rent for a comparable property. The rental agreement required is normally for a longer period of time than month to month. This is usually done with a lease agreement that obliagtes the renter to pay rent for a fixed number of months or years. If the renter defaults on an agreement like this the landlord may opt to "accelerate" the lease payments so that they become all due and payable at once.

 In a rent to own arrangement the landlord would grant the tenant a right to purchase the property sometime in the future. Some landlords will not fix the option price but prefer to leave the purchase right more open. This is not an advantage for the renter and any such arrangement to purchase should be carefully considered before entering into the lease.

In the usual circumstance the landlord already owns the home and wishes to obtain a rent paying tenant. The tenant's choice is limited to the one home available.

 Sometimes the landlord may offer to credit a portion of the rent payments toward the purchase price. This feature tends to encourage the landlord to ask for a higher than market rent in order to have enough "room" in the rent to grant the credit. While the rent may be higher, this can be a tool to help the renter "save" for a down payment. This technique is not always good for the renter because of this tendency to inflate the rent amount demanded by the landlord.

The best arrangement for any tenant interested in lease to own homes as a means of transitioning to homeownership is to use a program with the following characteristics:

1) A choice of more than one home from which the renter can choose.

2) A fixed strike price with an extended term to purchase.

3) Help in financing the purchase when the tenant elects to exercise their option. This can be in the form of rent credited toward the downpayment or facilitation by the landlord of assistance in obtaining the loan needed to purchase the home.

4) In the best of all worlds the tenant should undertake to improve their credit preferably with professional help. It is always possible to do this on your own with the proper research but without good credit the purchase option will be worthless because the tenant cannot really obtain a loan to buy.