Recently, a buyer asked if he should “buy” a rent to own.
Well, what exactly is a rent to own home? A rent to own home is where the seller is going to let a buyer move into the home with a down payment (that is usually non-refundable if the property does not close), and make monthly payments until such a date that the buyer obtains their own financing or pays off the home.
In some cases the buyer is essentially a glorified renter, because the buyers name is not on the deed and the current owner still has their name on the title.
The current owner/seller can sometimes still have a loan on the property, thus making it impossible for them to transfer the deed. Before the buyer moves into the home a price is negotiated and terms accepted so that there is a set time that the buyer has to have the financing to buy the home. The terms cannot change unless the buyer does not close on the home in the set time. Because the seller sometimes still has a loan on the property if they do not make the payments on the home, the home can be foreclosed on the buyer can be left with nothing.
So knowing what a rent to own home is can help you determine if it is the right option for you. If you are looking to buy a home and have credit issues that will take less than a year, Rent to own may be a great option. This would allow you to get in a home and start making it yours, building equity, fixing your credit, and allow you to purchase in the next two years. If you are new to an area, or not sure if you want to own, you may just want to do a straight rent and then decided to purchase.
Before you consider doing a rent to own home, talk with a local lender/loan officer, you may be able to get a loan and purchase the home immediately without putting a deposit on a home. A loan officer can also guide you in the right direction to help “fix” your credit and get you on the track to purchase a home. A local REALTOR can also guide you in the right direction for rent to own homes, rentals, and homes.
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