Renting has its perks. Renting is a lot easier to qualify for than purchasing a home. Renters also have the advantages of not having to worry about the property maintenance, insurance, taxes, or fees – they simply pay the bills. Be that as it may, there comes a time when you just want something to call your own. Homeownership is a dream that you want to see come to fruition, but you know you’re not quite ready.
Understand What it Takes to Purchase a Home
Being a homeowner carries a lot more responsibilities than being a tenant. You are responsible for the financial and physical aspects of the property from the time you close the deal until you pay off the loan or sell the home. To purchase a home (unless you have cash upfront), you also need a reliable, steady income, a reasonable credit score, and a sizeable down payment.
Don’t have all of this right now? There is a solution that combines the benefits of renting and eventually leads to your dream of homeownership. A lease to own or rent to own option.
What is Rent to Own?
Rent to own is an alternative for those with bad credit, not enough money, or who are just not ready to purchase a home. It combines both renting and buying. This option, in a nutshell, is renting the property until you’re ready to buy it. It is often the most efficient solution for purchasing a home with bad credit.
As the renter, you search for rent to own properties in the area, negotiate a contract with the homeowner, and pay an option fee. You then pay timely rent and these payments are later used as credit towards your down payment to purchase the home. After a predetermined lease term, you then apply for a mortgage and assume ownership of the property.
How This Works for You
Rent to own is a great solution when you’re just not ready to purchase a home, but want something to call your own soon. Advantages include:
- Have Time to Build Your Credit – A rent to own contract gives you the advantage of time. You now have time to rebuild your credit so that you look more attractive to lenders when you’re ready to purchase the home.
- Have a Larger Down Payment – Outside of bad credit, one of the most challenging things about purchasing a home is securing the down payment. With lenders requesting as much as 5-20% down, trying to secure those funds while keeping a roof over your head can be tough. In a lease to own scenario, however, the money you’re paying for rent acts as a savings for the down payment.
- Give the House a Test Run – Most homeowners aren’t given the opportunity to give the house a “test run”. They’re expected to make a purchase on the property and whatever issues may follow are theirs to deal with. With a rent to own option, you get to familiarize yourself with the house. You get to see how often things break down, and whether the house is a good fit for you before you actually make the purchase.
For years you’ve been tussling with whether you should rent or buy. You like the perks that come with renting, but you want the reward of having your own property. If a down payment, bad credit, or income are holding you back from being a homeowner, a lease to own option could be just what you need. It provides you with the best of both worlds for a few years until you’re ready to take the next step towards homeownership.
Recent Posts from Modest Money
- Gaia, Inc. (GAIA) Stock Is Keeping It Peacefully Real
- The Most Secure Coin in the World
- Are Airline Stocks Ready To Take Off?
- A Forex Beginner's Guide
- Cancer Genetics, Inc. (CGIX): Don’t Fight the Tape, Stock Going Higher