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Rent-to-Own Is The New “Subsidized Housing”

Let’s say you’re shopping for homes and find the perfect home, but the price is a little out of reach.

Maybe putting 20 percent as a down payment or low credit scores prevent you from loan qualification. Whichever the case, a rent-to-own program might allow you to secure the home of your dreams. We’ll explain how in this article.

If you need help right away, this relief program will direct deposit a short term loan into your bank account. Review the terms of this funding closely before accepting these funds.

What Is a Rent-To-Own Home?

Homes that are difficult to sell are sometimes listed as “rent to own.” Instead of buying the house then and there, an interested buyer has the option to lease now and purchase it later on.

In a rent-to-own situation, the seller agrees to sell the home at a specific price in one to three years, without putting it on the market. During this time, the prospective buyer will lease the house for an agreed-upon amount.

How Do Rent-To-Own Programs Work?

Typically, when a home is listed as rent-to-own, the seller will require an option fee at the beginning of the lease period. It is similar to a deposit. A standard option fee is around five percent of the purchase price of the home.

Should the interested buyer decide they do not want to purchase the home, the option fee is typically non-refundable. Some sellers will allow the option fee to go towards the purchase price or down payment of the house after the lease period is over.

During the lease period, monthly “rent” will be paid to the seller. The seller will not put the house on the market unless the buyer decides they do not want to purchase it.

The buyer may negotiate a rental credit, which puts a portion of the monthly rent paid towards the eventual purchase of the home. There is usually an option to buy before the end of the lease period as well.

The home must be sold at the price contracted at the beginning of the lease. This is one of the main benefits of rent-to-own. You can secure a house now, and the price will not go up even if the market does.

How Much Does Rent-To-Own Cost?

As mentioned, the option fee is typically five percent of the home price, which can be negotiated with some sellers. If the home’s purchase price is $100,000, $5,000 will need to be put down as the deposit, which may serve as part of the down payment when the home is purchased.

If the monthly rent would typically be $1,000 per month, the seller may increase it to $1,200. The extra $200 per month could be used as a credit for purchasing the home. At the end of the three years, $7,200 will have already been paid towards the down payment or purchase.

Stop! If you need financial assistance such as money to pay bills, a personal loan, or debt relief. See what resources are available to help you today.


What If You Don’t Have Good Credit?

One of the main benefits of a rent to own program is the ability to build credit over the lease agreement so that you can qualify for the mortgage. Before entering a rent to own program, talk with a loan officer to see what you can realistically be eligible for in your timeline.

Sellers are more concerned with whether or not you can make the monthly payments. Since they are profiting monthly, can sell the house later on, and can keep your option fee, they are less affected if you decide you can’t afford the home.

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