What Is Rent to Own?

A rent to own agreement gives the buyer control of a property, not full ownership, with the ‘option’ to purchase the property at the end of the contract period. Essentially it is a contract to buy a property with an extended closing date. That way you, as the buyer, have time to clear up any credit issues, or whatever your issues are preventing you from obtaining a traditional mortgage and to line up financing at the moment.

Typically, you, the buyer, will put down an option consideration, like a deposit for a rental, to secure your place as the future owner of the home. Then you’ll make monthly payments, and at any time during the option period, you are authorized to complete the transaction of the home. The process of “How it Works” is very simple.

What to Expect as a Tenant Buyer

Being a tenant buyer is different than being a renter. In a rent to own agreement, since you’re both a tenant and the future owner of the home, you’re expected take greater pride in the property and have greater responsibilities towards it, and you’re expected to uphold your duties as a good tenant as well.

While usually the mortgage, HOA, Insurance and taxes are covered by the seller during the option period, you as the buyer are responsible for the maintenance, repairs and upkeep of your new home, just as you would be if you bought it outright.

Being a tenant buyer is sort of like a bridge loan between renting and homeownership. You have the obligations of being a good tenant, but you’re also held to a higher standard that you would be held to as the owner of the property.

Renting to own gives you the future opportunity of homeownership while grooming you for the responsibilities that come with it.

Why Rent-to-Own is a Smart Choice

Like all great agreements, renting to own is beneficial to both the seller and the buyer.

But, let’s take a look at the advantages for you as the buyer.

In a rent to own agreement, you, as the buyer, freeze the price on the home for a year or two in advance of when you’ve agreed to close on the purchase. Since most markets appreciate, you’re locking in a good deal.

The extended closing date allows you the time to clear up any credit issues, and get pre-qualified for a loan. When you meet with a mortgage broker you’ll understand the amount of debt you can shoulder each month and still be approved for a loan. You’ll also discuss loan types, making you a well informed future borrower.

Essentially, renting to own gives you the time to get your finances and credit issues in order while you’re living in your dream home.