Usually, when regular home buying is done, the sale is made shortly after an offer is received and the transaction completed at closing. Since many buyers do not have the money for a cash purchase; they usually will turn to mortgages to get the financing. The buy makes a down payment then makes regular installments to the lender over a period until the balance is paid in full.
It is, however, is difficult for one to qualify for a mortgage if they have a poor credit score. Without these in place, purchasing a home in the traditional way may not be an option. However, one can benefit from the option of the rent-to-own agreement. In this kind of agreement, the buyer is allowed to rent the home for a set time before they can make whether they want to buy it before or when the lease period expires.
The Elements of a Rent-To-Own Contract
The the contract shows time and the manner in which the buying price of the house will be determined. There are times when the seller and the potential buyer will agree on the purchase price after the agreement has been signed-often at or higher price than the current market value. In other situations, they agree to determine the price when the lease expires, based on market value future point in time.
During the lease period, the potential buyer pays the seller a specified amount of rent each month. The lease period is negotiable, but in most cases, it ranges between one and three years. In many agreements, a portion of each monthly rent payment is applied to the purchase price.
The terms of the contract may put the responsibility of paying for house repairs and maintenance to the potential buyer as well as paying for the homeowners association fees, insurance and property taxes. The seller is overall responsible for the association fees taxes and insurance, he may decide to cover those expenses. Even in this case, it is important that the buyer has a renter’s insurance policy to cover for a loss of personal property or if anyone accidentally hurts themselves in the property.
Be sure to have the maintenance and repair requirements specified in the contract. Normal maintenance and repair requirements like mowing, cleaning the gutters and raking leaves is quite a different form replacing damaged roofs.
Purchasing the Property
The rent-to-own contract can be a good option for people who want but are not financially ready to become homeowners. The rent-to-own deal gives them the chance to straighten their finances for a while as they lock in the house they like to own.
To make the rent-to-own work, the potential buyers need to be confident that they will be ready to buy the house when the lease term expires.