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Article source: http://i-can-buy.blogspot.com/. Used with authors permission.
Finding a rent-to-own house is one of the many ways someone with bad or nocredit can buy a house. You will often find them called names like lease/options, lease with option to buy, lease purchase, lease 2 purchase, rent with option to buy, rent to own, or rent to buy homes.
There are a few differences between rent-to-own and lease-option agreements,although many people use the terms interchangeably. With a rent to own (or rent tobuy) home, the buyer makes an agreement with the owner that part or all of the rentmoney will go towards the down payment of the home, and at a certain date,perhaps 2-5 years in the future, the renter will purchase the home, using the moneythat was set aside as the down payment.
There is usually not much money put down in the beginning, outside of what wouldnormally be needed for a rental home, so this is a good way to get into a home forlittle or no down payment.
Another advantage to a rent to buy situation is that if you compare how much rentmoney is applied monthly to the home price, even if it is only 25-50%, it will still bemuch more money paid on the principal of the house than if you had taken out aloan for it. If you look at how much money goes to the principal payment of a homewith a typical mortgage loan, you will find that most of your mortgage payment inthe beginning is just paying interest on the loan. A rent to own agreement, wherethe money goes directly to the payment of the home, could be saving you a lot ofmoney in the long run.
With a lease-with-option-to-buy, a renter signs a lease agreement (often for ashorter period of time, like1-2 years, but it could be longer). The renter/buyerusually pays a sum in cash, usually non-refundable, to the owner in agreement tobuy the house at a later date for the price agreed upon. The renter has the option orright to buy the home, so in the end they have a choice and can back out it theywant. Some of the rent paid may or may not go towards the purchase price of thehome.
This is a technique often used by real estate investors in periods when the interestrate is rising fast. This way they hope to buy the home at a lower interest rate on alater date. In the meantime, they will sublease the home to someone else, who willmake the payments for them.
Again, the terms lease option and rent to buy are pretty much usedinterchangeably today, so check with the owner to find out exactly what terms theyare offering. Or approach an owner with your own offer for renting to own.
If you are a renter who is tired of paying someone elses mortgage and want to ownyour own home, this is one of many ways that you can buy a home. One of thedrawbacks is that you will still need to purchase the home at a later date. This maybe a problem if you have bad credit, because you may still need to qualify for a loanwhen it is time to purchase the home. If your credit can be repaired in several years,this may be a great way for you to get your home now, and good motivation to cleanup your credit for the future. From the book Buying a Home When You Have Bad Credit-- 12 Ways to Purchase aHouse When You Cant Get a Home Loan by Alexis Dey. © 2005 Mohave Publishing.All rights reserved.
For more ideas on how to buy a house when you cant get a home loan, look for ourexclusive e-book, Buying a Home When You Have Bad Credit, which can beordered only through our site at I-can-buy.com.
For free rent to own agreements, as well as other free real estate contracts andforms to download in PDF format, check out our site at site at I-can-buy.com
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