When looking for great low-cost financing for a new home it might be beneficial to consider rent to own homes. A rent to own home begins with you as a rental tenant and ends with you owning the home instead of your landlord or the previous homeowner. The terms for these types of programs tend to be challenging to navigate for some people. There are also many potential benefits for both sides when a rent to own agreement is handled properly.
A rent-to-own agreement involves you and either your landlord or a different homeowner. The purpose of the agreement is to create affordable terms for you, while steadily releasing the current homeowner from the financial obligations pursuant to the home.
The agreement contains a rental lease, that includes either a purchase option or a purchase commitment clause. Portions of your monthly rental payments are put toward the mortgage of the home. This allows you to build equity in the home while still renting.
Your monthly rental payments might be higher at first so the landlord/homeowner still profits even though part of your monthly payments is going toward equity.
Rent to own home agreements work well for people who are not yet qualified to obtain a traditional mortgage loan due to bad credit or poor income to debt ratios.
Most often the responsibility for property repairs and maintenance are placed on you as the renter. There are up-front fees and other fees included in the agreements, which are all payable by you.
Some agreements allow you to exit the contract penalty-free without purchasing the home. Please note, the extra money you spend each month toward equity, all fees and maintenance/repair costs paid by you are non-refundable. The three biggest benefits of a rent to own home agreement to you are:
• When taking over homeownership you already have equity built into your home.
• There is time to decide if owning a home is the right move for you prior to actually buying one.
• It is a potential way to initially bypass borrowing limitations due to bad credit or other eligibility issues.