Q. Are Rent-To-Own Homes A Good Idea?
A. If you’re interested in owning a home, but you’re having some difficulty obtaining conventional financing, renting a home with the option to buy may be a good alternative. In this scenario, a portion of your rent goes toward the purchase of the home. It’s important to carefully read the contract, and consult an attorney if you have any questions or concerns before entering into a contract.
Typically, you will sign a lease with an option to purchase for an agreed price over a specific time (1-2 year lease, at which time you’ll need to obtain financing from a lender). To acquire the option, the renter/buyer pays a one time, non-refundable fee, called the option consideration (2-7% of the purchase price). A percentage of all your rent payments (at least 50%) should be applied toward the purchase of the home. Rent payment must be on-time; otherwise it won’t count towards the purchase price.
You’ll be required to handle most of the home maintenance. Make sure you have the house inspected by a professional before entering into a contract.