Would-be home buyers sometimes find themselves in a position where they feel emotionally prepared to purchase their first property, but are not financially ready. The reasons for this may vary, whether it’s because they haven’t saved quite enough money for a down payment yet, or if they still have just a little too much debt at the moment, or if they don’t have a good enough credit score yet. Whatever the reasons may be, some home buyers need to wait a little more before they can buy a home. In some of these cases, a rent-to-own or lease-to-own arrangement is a possible solution to the problem.
Rent-to-own arrangements may vary in their exact terms, but the general idea is that the property owners and the renters will come up with an agreement in which the renter will rent the house for a specific amount of time, then buy the home when the said time period ends. Usually, the renting period ranges from one to three years, with the renter paying an above-market rent, which goes toward a down payment when the contract ends.
In such arrangements, the renter benefits by having the opportunity to settle into the home they want to buy while they continue to work on saving for a down payment, improving their credit score, or reducing their current debt. Owners can benefit by “getting rid” of their home, especially if they really need to move, or if their home isn’t selling fast enough.
When agreeing to a rent-to-own arrangement, both parties MUST have a lawyer review the contract, because such deals may come with multiple issues that need to be addressed. At the very least, any lease agreement must include:
- Length of the lease period.
- Rent amount.
- Rent credit for down payment and how it will be held until the time of purchase. Both sides need to agree in writing what will happen to the credit if the renters opt out of buying at the end of the contract.
- Who will pay property taxes, insurance and homeowner fees during the lease period.
- Who will pay for utilities, maintenance and repairs during the lease period.
If you feel ready to buy your first home but your financial circumstances aren’t quite ideal, you may want to consider a rent-to-own arrangement. Talk to your real estate agent to learn more and decide whether it would be a good and feasible option for you.
If you are planning to buy a home, let The Incorvaia Team make the process as easy as possible for you. Call us at 440-879-7130 today!
