What is Rent to Own?
Simply put, rent-to-own is renting with the option to buy. The deal is set up using an Occupancy Agreement and an Option to Purchase Agreement. With rent-to-own, then tenant-buyer has the option to purchase the home at a pre-determined price within a given time period.
Rent to own is also known as lease to own, lease option, lease purchase, or rent to buy.
Benefits of Rent to Own
There are several benefits of rent to own, but the biggest benefit to our clients is that we are often able to say yes when the bank has said no. With rent to own programs, clients can:
- Use a lower down payment
- Build equity (through monthly rent credits)
- Build sweat equity (through building improvements)
- Avoid expensive closing costs
- Take time to repair/re-establish credit
How Does Rent to Own Work?
- The tenant-buyer puts forward a small down payment. This is credited towards the purchase price when they purchase.
- The tenant-buyer makes monthly payments and a portion of each payment accumulates additional down payment funds which are also credited towards the purchase price when they purchase.
- During the rent to own program the tenant-buyer works to establish or repair their credit.
- At the end of the program, the tenant buyer applies for financing through a conventional lender.
- With an accumulated down payment and a mortgage pre-approval, the tenant-buyer purchases the home and officially becomes a homeowner!