If you are wondering if you can purchase a house through rent-to-own, the answer is yes. You may further ask, how this is possible. For those who are unfamiliar with this arrangement, rent to own homes is another term for lease purchases. In this arrangement, the person leases the property and is given the choice to purchase it at a specified period. The period will be agreed by the parties involved. Normally, the period will take about three years or less.
What does the buyer do?
In this transaction, the renter is required to pay the seller or the property owner an amount for option fee. The fee is to give the buyer a freedom to decide to whether pursue the purchase or not. The parties will have to agree on how much payment will be made. Often, this will be computed as a small percentage of the property’s value.
Aside from the option fee, the buyer will have to make premium payments as part of the rent. This can be paid together with the monthly rent, but it will be recorded as a different payment. It shall be credited off the premium price. However, if the buyer fails to purchase the property during the option period, he loses the option fee together with the rent premiums.
If you want to purchase a house in this manner, you have to be careful. It is best that you see a real estate lawyer. Keep in mind that each state has varying laws regarding such purchases. You may learn general information about it, but there are specific guidelines that you have to know to ensure that your interests are protected.
Points you need to note of:
It is important that you take note of significant information when purchasing a house through this. You may be happy to know that although values for the rent and the property are based on the market, you can negotiate it. It is also essential that you do your homework. This is because most buyers normally know more and they can take advantage of it.
Although long option periods are good, you have to be very careful with your decision. Bear in mind that you can lose your option fee and rent premiums if you fail to purchase the house within the option period. Most sellers want to have shorter periods, but they are careful too. If the period is too short, no one will buy the property.
This is a very good option for those who want to purchase a house but needs time to repair their credit. Again, option periods are about three years at most. This will give them ample time to repair their credit.
If you cannot get your loan approved, this is a good alternative to own a property. But you have to study your options very well. Do not waste your option fee and rent premiums. Check the location, your neighbors and the property itself. Keep in mind that you lose these payments if you choose not to pursue the purchase.
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