One of the biggest hurdles for prospective homebuyers is saving up thousands of dollars to afford a down payment on a home. But you may be able to jump this hurdle more easily with a rent-to-own home agreement. 

This program allows you to live in your home while you pay rent, essentially paying your down payment in installments. Rent-to-own programs ensure you have a place to live, help you work toward buying a home, and give you the option to purchase the place you’ve called home for a year or more.

Love Your Rental? Buy It Through a Rent-to-Own Program

There are two major types of rent-to-own programs:

  1. Lease-option agreement – this gives you the option to purchase the home at the end of your agreement
  2. Lease-purchase agreement – this requires you to buy the home at the end of the agreement

Both options require you to make monthly rent payments, a portion of which goes toward the purchase price. Some agreements may include details about how much of your rental payment goes toward purchasing the home and the total amount you will pay for the home when you purchase at the end of your lease.

When the selling price is in your rent-to-own contract, it’s a permanent figure that can’t change with increasing or decreasing home value prices in your area. That means if the prices of homes go up while you’re in this agreement, you’re getting the house for a good deal. But if home prices go down, you’ll be overpaying. You may want to review home and property value trends for the area before signing one of these rent-to-own agreements.

If the contract does not include the purchase price, it can change through negotiations between you and the owner. This may be ideal if home value trends in your area constantly change. 

There are a few different ways you can find a rent-to-own program in your desired area. First, try searching for a rent-to-own program like Divvy or Dream America. With these programs, you get to pick your own home up to a certain price point, they buy the home on your behalf. When everything is said and done, you’ll rent the home from them until you’ve paid the agreed-upon amount. 

Next, you can try to find rent-to-own properties from home search sites. Some real estate companies give you a rent-to-own option by partnering with rent-to-own mortgage lenders. You can also search for rent-to-own homes listings on property search sites like Zillow or fine rent-to-own home loans through a mortgage lender.