Want to buy a house? You have picked the right time. Mortgage rates are quite low at the moment, so you are likely to get a good deal. If you cannot qualify because your credit score is not good, or you are unable to raise the down payment, you should not worry. Consider a rent-to-own arrangement.
1. What is a rent-to-own agreement?
The basic definition of a rent-to-own agreement is that it is an installment plan. For instance, you want to buy a house that can be rented for $1,500. You agree to pay $2,000 per month. The extra $500 is said to be credit towards buying the house. At the end of the three-year lease period, you will have $18,000 set aside. You can use the amount as down payment, earnest money deposit or even for closing expenses.
2. Who are they good for?
A rent-to-own agreement is advantageous to customers who want to buy a home but cannot meet the requirements for accessing mortgage loans such as credit score. The rent-to-own client has time to build good credit or save up the down payment. Therefore, at the end of the lease period the customer qualifies to be a buyer.
3. Are rent-to-own agreements worthwhile?
It is important to understand all your available options before entering into such an agreement? When weighed against other kinds of homeownership, rent-to-own are not the best. Thus, it is important to explore your options before signing the contract.
4. What to look out for
Rent-to-own agreements vary greatly. It means that you should analyze what you are entering into before appending your signature on the document. Take time to read the fine print and ensure that all terms are favorable before committing. For instance, some sellers put a clause stating that when you miss a payment, the landlord can evict you. Beware of such unscrupulous landlords.
