A rent-to-own home is a good option for purchasing a home if you don’t have enough cash for down-payment
Q: How does the rent-to-own process work?
A: In many cases, people are unable to purchase a home because of lack of financing. And while banks these days are making it easier to get a housing loan, factors like not enough down-payment money, an unstable job, and a bad credit standing can still render you unable to secure one. In this case, for a person to be able to achieve their dream of becoming a homeowner, one popular option is to enter a rent-to-own agreement.
As the term implies, a rent-to-own property is one that is leased for a specific amount of time, at the end of which the lessee is given an option to purchase the home. The lessee is obligated to pay premium monthly rent because the portion that exceeds the property’s market value is put aside as down-payment should the lessee decide to go through the purchase. Should the lessee decide in the end not to buy the home, whatever down-payment has made toward the property stays with the property owner/lessor.
The biggest benefit to the lessee is that they get a real feel of the home by living in it, without the immediate need to purchase it. The time spend renting the home should also give them a chance to fix their credit to finally be granted a home loan. The owner of the property also benefits from the agreement, in that the home doesn’t have to stay unsold for a long time; the property generates income while it is off the market.
During the negotiation stage, the owner/lessor and renter/possible buyer will draft a contract that stipulates the terms of the agreement, such as the monthly rent, the date when the renter should decide whether to buy the property, and the selling price. This is also where decisions related to tenancy should come into play, such as whether the owner will allow pets, and if the lessee is allowed to renovate the property. As in all contract agreements, getting everything in writing is essential to avoid conflicts in the future.
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