Frequently Asked Questions

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Table of Contents

  1. What is rent-to-own?
  2. Is rent-to-own a new concept?
  3. Who chooses rent-to-own?
  4. How is rent-to-own different from renting?
  5. What are the benefits of rent-to-own?
  6. Do I have to buy the house at the end of the lease period?
  7. Will my down payment and monthly rent be credited back to me if I decide not to purchase the property at the end of the lease period?
  8. Who pays the home insurance and real estate tax during the lease period?
  9. What is an option fee?
  10. Do rent-to-own homes allow me to bring my pets?
  11. Step One: Explore
  12. Step Two: Create
  13. Step Three: Compile
  14. Step Four: Maintain

1.What is rent-to-own?

Rent-to-own houses allow buyers to invest in their homes by paying a set amount each month to live in the house. At the end of an agreed leasing period, the buyers have the option to purchase the home.

2. Is rent-to-own a new concept?

No. Rent-to-own has actually been around for more than sixty years, but it is becoming more and more popular. Since it is more difficult now to go through the loops of obtaining a loan and purchasing a home right away, rent-to-own is a good second option.

3. Who chooses rent-to-own?

Potential buyers included:

  • People who want to improve their financial report over the lease period
  • Renters who want to test a home, area or school district before committing to purchase and stay long-term
  • Renters who are trying to look toward home ownership instead of continuing to rent

4. How is rent-to-own different from renting?

When you rent-to-own, your deposit will go toward your down payment at the end of your agreed period if you decide to purchase the home. Also, a portion of your rent will be credited back to you at the time of the purchase. If instead you choose not to purchase the home at the end of the period, you will not be credited back any money.

5. What are the benefits of rent-to-own?

  • You can have the priority of purchasing your dream home before any other party while building or fixing and financial dilemmas that could potentially hold you back from purchasing it
  • You have no obligation of purchasing the home, so you can walk away from the house at the end of the lease term without feeling pressured to buy it
  • You can learn the responsibilities of taking care of a home
  • Your money won't go to waste because a portion of your down payment and monthly rent will be credited to the purchase at the end of the period
  • The rent-to-own agreement freezes the price of the property so it will not rise or fall during the lease period which could potentially help with equity gains

6. Do I have to buy the house at the end of the lease period?

No. At the end of the lease period, you have the option to walk away or purchase the property.

7. Will my down payment and monthly rent be credited back to me if I decide not to purchase the property at the end of the lease period?

No. Unfortunately the down payment and monthly rent is nonrefundable.

8. Who pays the home insurance and real estate tax during the lease period?

The seller maintains full insurance and pays the property taxes, HOA dues and other necessary fees.

9. What is an option fee?

An option fee is not the same as a security deposit. The option fee is paid at the beginning of the lease period and is what allows the renter to have an exclusive right at the end of the period to decide whether or not they want to purchase the property.

10. Do rent-to-own homes allow me to bring my pets?

Most properties will allow you to have pets, but is specified in the agreements. Sometimes sellers will ask for "pet rent" to be added to the monthly rent. "Pet rent" can vary from $5-20 per month.

11. Step One: Explore

Explore the choices of homes for rent-to-own on the market, as well as looking for multiple lease option candidates.

12. Step Two: Create

Create a draft of an offer that works for you and the seller. Become familiar with the terms purchase price, rent per month, option fee, option credit, option period, property tax, HOA fees and more. These terms will be important when negotiating and deciding different prices. Remember that all of the negotiated prices will be locked and set until the end of the agreed rental term, even if other housing prices rise or fall during that time.

13. Step Three: Compile

Put together the final Rental Agreement, Option Agreement and Sales Contract. Make sure to look at lease options that require you to put as little money down as possible.

  • Rental Agreement: This includes the how and where the rent is paid, the security deposit amount and where it will go at the end of the lease term, monthly rent rate, how long the rental period will be, notices of late fees and more.
  • Option Agreement: This agreement will ensure the seller cannot sell the home to any other party, as long as you are following the terms agreed. If you decide to buy the house at the end of the lease period, the option fee will become a part of your down payment. If you decide to not purchase the house, the option fee becomes income for the seller. The Option Agreement will include whether or not the option fee can or be refunded, how and when the option fee will be paid, price of the option fee, a deadline of when the option will expire and more.
  • Sales Contract: This includes home inspection requirements, purchase price of the home, list of items to be included upon sale (appliances, furniture, etc.), financial details on the new loan and details on title insurance. The sales contract is standard and provided by your real estate agent./li>

14. Step Four: Maintain

Make sure you maintain, build or repair your credit to help you successfully purchase your home at the end of the rental period. And at the end of the agreement, you could be walking away with your new home!