Rent or Lease to Own considerations

With fewer and fewer buyers as well as tight financing, some sellers are offering rent or lease to own, or owner financing, alternatives. These options, usually called a lease-purchase option, require buyers to pay rents where some goes towards the agreed to purchase price. Lease or rent to own agreements, if prepared properly permit people, who may have trouble with financing to buy a home otherwise.  

Benefits

Most agreements are written for one to three years to allow buyers to build down-payments and to improve their credit histories to obtain an easier a future mortgage.

Most rent to own purchases are from individual sellers who may have purchased another home and need to counterbalance some of the mortgage costs.

Disadvantages

You could lose your investment. There may be few safeguards for buyers who fall behind on monthly payments. If you fall behind and are evicted, you may lose already paid fees and rents.

In the case of short term owner financing or rent to own, you may not get a loan in the end. If you still cannot arrange appropriate financing you may lose all additional cash invested. Any terms to the contrary would need to be written in an agreement. Using a contingency phrase could help that spells out the release of up-front fees and extra rent paid to be returned if you don’t qualify for a loan.

Affordability

Most important for buyers who consider entering these deals is they must ensure the home they are buying is affordable. Payments can seem convenient and inexpensive at the time, but there may be more unpredictable expenses in any future loan.

Contact your local Realtor for more information about Rent or Lease to Own, or Owner Financing. They have been doing these types of loans for years and are familiar with the benefits, pitfalls, and intricacies of these contracts.

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