For many families, rising home prices and interest rates can make homeownership feel farther away than ever. Rent-to-own homes provide an alternative route to buying a house, especially for people with a poor credit history. But whether you're buying or selling, is it the right option for you? Read on to learn more about the rent-to-own process.
What Does a Rent-to-Own Agreement Include?
Most rent-to-own agreements see the buyer paying an extra amount per month on top of rent. These additional payments build up into a down payment on the home. After an agreed-upon period, such as three years, that down payment is rolled into a standard mortgage and the sale completes.
Who is a Good Candidate to Rent to Own?
Renting to own makes sense when a buyer qualifies for pre-approval on a home but suffers from a credit setback. A rent-to-own agreement allows you to live in the house you want and make progress toward buying it while rebuilding your credit. For sellers, a rent-to-own agreement lets you work with buyers and lock in a price, and you'll still make rental income in the meantime.
How Can Buyers and Sellers Protect Themselves?
Because a rent-to-own contract usually plays out over years, it's important for everyone involved to understand its terms. Before signing, consult with a real estate attorney to make sure you can uphold your side of the bargain. With the right preparations, a rent to own agreement could be the perfect way to sell or make your home-buying dream a reality.