Rent-to-Own Offer a Path Toward Home Ownership
Updated: February 13, 2020 | Posted by: foodsupport.org | Related: First Time Home Buyer Assistance
We may indeed be prepared to have our own private space, or home so to speak, but certain cases may leave us being unprepared financially. Having said this, the great solution would be to resort to having rent-to-own homes. Rent-to-own housing has always been advertised to be such a great deal for homeowners who are having quite a trouble in selling their space; and also for buyers who are having a hard time getting established financing, because of poor credit or less budget for down payment.
Rent-to-own is an excellent choice for people who desire to be homeowners. This agreement provides a chance for them to organize finances for the house they would want to have. This give them some time to improve their credit score or to save money for their down payment. If the option money or a percentage of the rent goes toward the purchase price, the buyer also gets to start building an equity. To make it work, these buyers should be confident and ready enough to make the purchase when the lease term expires. If not, they will have to pay for the option money and a rent premium for 1 to 3 years, showing nothing at the end.
Rent-to-own home terms may vary from one buyer to another. However, in general, property owners and the renters are required to sign an a agreement contract stating that the renter will rent the property within one to three years. In that span of time, the renter will usually pay a price set higher than the current market price of the security. The buyer’s excess rent is credited toward a down payment as the contract ends.
In a rent-to-own agreement, buyers can move into their desired house anytime. Aside from this, they also have several years to improve their credit score and to save for a down payment. Although many states set their own regulations, and there are no similar rent-to-own contracts, somebody in a rent-to-own agreement usually rents the property for usually one to three years. After such specified amount of time, the renter purchase the house from the seller. That sounds easy but it’s not as simple as it seems. It’s not just paying rent for 3 years and buying the house after. Be reminded that certain terms and conditions still has to be met in accordance with the contract.
A price for the home is typically set by the contract at the end of the lease. The tenant should have enough savings for their down payment, and should also have an improved credit score by the end of the agreed-upon rental term. With this, they may even be eligible for an insured CMHC mortgage.
Now, let us discuss about the benefits for rent-to-own homes. There is always an opportunity to live in a new home that they want to purchase offered to prospective buyers by rent-to-own deals. This is possible as they continue saving for a down payment, improving their credit score, or even waiting for a negative factor on their credit report to be forgotten. There also are instances when the home sellers offer to a rent-to-own contract if their home isn't selling that fast, and they've already been wanting to move out.
There are also other tips that you should keep in mind about rent-to-own homes. As a renter, you should always think several times and measure your choices of grabbing a rent-to-own contract, renting a low-cost home or just saving money for a down payment on your own. If you would love to have a house and you’re motivated to own it, a rent-to-own contract could be a good idea even when it costs a lot of money.
You must understand certain matters when the title is transferred to you like knowing who will be responsible if something happens to the property while you live in it. You can also do a home inspection before purchasing the property to make sure if it’s in good condition.
If the rise of home prices has been one of your concerns in locking in a home, considering a rent-to-own home is for you. However, you should make sure that the contract states what would specifically happen if home values rise or fall between the time of the signed agreement and settlement. This is the time when your attorney’s assistance should be mandatory.
Potential buyers can move into a house while strengthening their finances through the help of rent-to-own agreement. With this, they get an opportunity to get the house within the future. This could also be risky since they might end up losing money if they don’t buy the property when the lease expires. It’s very important for buyers to carefully read and understand every word in the contract, and to be informed exactly what they’re getting into.
The buyer should know certain conditions in advance before committing to the agreement; for an instance, if the contract can become void when he or she is one payment delayed. Even when a real estate agent assists you with the process, it is vital for buyers to consult with a qualified real estate attorney who can help them in the clarification of their contract and rights before signing.