With owner-occupiers making up over half of all those living in homes in the United States, it’s clear that homeownership is still a priority for American families. But with city rents falling and suburban rents climbing, owning your own plot of land is getting further out of reach.
Rent to own home programs are being touted as a sensible, affordable solution for lower-income individuals seeking to own a home. Below, we discuss whether or not a rent to own home program is a sensible financial step for you.
How Rent to Own Homes Work
Those entering into a rent-to-own agreement (also called a lease-to-own agreement) will notice some similarities and differences to rental agreements they’ve signed in the past. Instead of signing one agreement, they will be asked to review and sign two.
The first document presented to a prospective rent-to-own participant will be a standard lease agreement. In this contract, the title of the home remains with the landlord until the tenant decides to purchase the property.
The second contract a rent-to-own tenant will need to sign is an option to purchase. This document gives the renter the option to buy the property within a specified time period.
Rent to Own Home Programs: Where’s the Risk?
In a rent-to-own situation, there are risks on both sides of the equation. Both landlord and tenant may lose money if one or the other fails to honor their part in the agreement.
Since the future price of the home is agreed on at the beginning of the rent to own program, tenants need to be sure that the price they’ll eventually pay is fair. Renters are usually also responsible for any repairs on the home during their tenancy.
Landlords have the potential to lose out, too. A common clause of a rent to own agreement is that tenants can legally choose not to purchase the property when the contract is up.
What to Do Before Signing
Tenants should insist on an independent inspection and appraisal of the property they plan to rent. Just as you would with a normal home purchase. It’s also essential to ask your future landlord to disclose any issues with the home, from leaky basements to aging HVAC systems.
Be careful. Some disclosures are mandated by law, though that’s not the case in every state. That’s why an additional inspection by a contractor the tenant hires is essential.
Companies like Homebuyer Creators assist you through this sometimes complicated process. From finding rent to own home listings near me to assessing contract terms, they divide their rent-to-own programs into simple steps that ensure safety for both tenant and current homeowner.
Opening a Door to a New Home
If you do your homework and proceed with caution at the agreement stage, rent to own home programs can be a path to homeownership for those who struggle to qualify for a mortgage. Browse rent to own home listings with your future family size, ideal location requirements, and potential home maintenance costs in mind.
Browse the other articles on our blog for more crucial advice on buying, selling, and renovating houses across the United States.