How To Buy A House With Rent To Own Option
Home ownership can be very expensive, especially for those who have very limited financial resources to begin with. One option that is available to people who would like to own a house but can not afford to do so just yet is to rent a house with a lease to own option.
Basically, a rent to own scheme is one where the renter pays an option fee and a rent premium. An option fee is the price that the renter pays the owner as an actual reservation of the house with the goal of purchasing it later. This fee stays with the owner whether or not the renter subsequently decides or pursues the purchase of the house. On the other hand, the rent premium is the amount that the renter pays to the owner every month covering both his rent and part of the down payment for the house. The period for such arrangement can range from one to three years.
If you are interested in entering into a lease to own option, you can start by looking at foreclosures list where you can find a property whose owner could perhaps agree to your rent-to-own proposal. Below are several things that you need to understand before you bind yourself in a rent to own agreement.
Assess Your Finances. Since the arrangement will require you to pay a rent premium, then you have to be prepared to make extra payments over and above your monthly rent. Similar to a mortgage payment, you have to pay the premium every month or the owner could seek for a rescission of your agreement.
Second, you must also be prepared to accept the fact the option money that you will pay to the owner will be forfeited whether or not you decide to buy the house later on. If you are not truly decided, then it may benefit you more to just rent the place in the meantime and propose an agreement later on when you are more ready to do so.
Negotiate Well. A rent-to own scheme is not an automatic arrangement. Renters need to persuade the owners or sellers of residential foreclosures to agree to the scheme. The renter and the owner will then have to agree on the price of the property and the term of the agreement. One advantage that the renter-buyer has over the seller in this scheme is that the agreed price is generally locked in once they sign the agreement. It is not subject to any fluctuation that may cause the price to either fall or increase afterwards. The contract price therefore is final.
Weigh The Pros And Cons. A lease to own agreement is as much as a responsibility as a mortgage loan. You have to fulfill your end of the bargain and pay the premium that you have agreed upon. It is imperative that you know what you are entering into. Renters are actually buying the house more expensively than what it would take for an outright purchase. On the other hand, it gives the renter some time to think about the purchase without losing equity and the risk of suffering a foreclosure. Renters also need to ensure that their current employment will be able to handle both the rent and the premium otherwise, the option fee could be lost. In the end, what will matter is how carefully you have planned for your purchase.
James Patrick Moore knowledge on residential foreclosures comes from his long experience in the market as a realtor. Get to know more about homes in foreclosure lists at Bank Foreclosures Sale.
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