A rent-to-own contract could be an alternative to purchasing a house right off the market. Giving homeowners the opportunity to rent the home of their choice, and securely locking in that home, while improving their credit is helping many people continue to move forward with their lives even during an economic downturn. There are a few things to keep in mind when considering a rent-to-own situation.
How to Meet Requirements for a Rent-to-Own Agreement
To qualify for a rent to own home, you must meet certain requirements including but not limited to, having a certain credit score, and proof of funds for a down payment. The qualifications for a rent to own home usually varies by individual homeowners, but particular requirements are often your ability to prove your state residency, your personal history, such as a background check, your credit history and documentation of your ability to repay loans or pay your bills on time.
Who Are the Ideal Candidates for a Rent to Own Transaction?
Although renting to own a home is one of the most convenient ways to become a homeowner, there are several ideal characteristics that will increase your chances of being accepted to participate in this type of agreement. Before deciding if this would be best for your family, run through the essentials that the seller is mainly looking for, such as if you are willing to buy a house, and see yourself as a homeowner in the future, but are not able to financially support this decision at the current time.
Another ideal characteristic is having a strong rental history with previous landlords. You are basically paying rent on a home you will own in the future, therefore you are still considered a tenant until you purchase the home completely. In some cases, this means, you are required to treat your future home as a rented estate and must follow the rules and regulations set by your landlord.
Having a stable job is an ultimate plus when looking for your perfect dream home. Since you will be paying rent every month, having a steady income will be beneficial to achieving your goal. In some rent to own transactions, you will be paying a monthly rent, and depending on your set agreement before purchasing with the seller, a percentage of your rent will actually go towards the final sale of the home. As a result, as you pay your monthly rent, you are building not only your credit, but also a credit towards the equity of the house itself.
How to Purchase Your Dream Home Step-by-Step
The first step is to locate the house you are wanting to buy. Sites such as HouseList and IRentToOwn are very useful for discovering houses already up for rent to own. Be warned: Some websites include a membership fee, and should be avoided. If you have found your dream home, and there is not an option to rent to own, consult with the seller about the possibility of writing up a specialized rent-to-own contract.
Establishing a purchase price and a specific amount due as rent each month for the duration of the agreement. The lease term for renting a home for ownership is usually between one to three years, but this timeline is also negotiable.
After you have settled the majority of your contract, do not neglect to mention the nitpicking options that usually are passed over, such as who will handle maintenance, who will pay for repairs, homeowners association fees, property taxes and insurance on the home. In most cases, the seller will remain responsible for the bigger picture situations.
As an example, a damaged roof is vastly different than maintaining the property’s lawn, be sure to go over any possible predicament that could occur while residing there.
When your lease is at the end of the agreed term, it is either time to purchase your home or opt out and walk away. Unfortunately, if you are unable to actually buy your home at the end of the contract, you could choose to extend your contract, if the owner of the home agrees on an extension. If you do not get an extension on the contract, all assets you have put into that home, will be forfeited.
If you discover you meet all the requirements and deem yourself a worthy candidate for owning a home, rent-to-own could be your best option. In just a few short years, you could be the owner of your dream house, you just have to look for the best opportunity. They are out there. Happy hunting.