In today’s tough real estate and credit markets, many people are buying homes using a rent to own agreement, or Owner financing. Because of the credit markets freezing up and buyers without a very high credit score not being able to obtain a mortgage, rent to own, or lease options may be an ideal way for buyers to purchase a home.
How Lease Options Work
The owner of a property signs an agreement with the person who wants to rent to own the home. This agreement is a binding contract and the renter has the option to buy the house from the owner at the end of the contract. In most cases, all the rent paid on the contract will be applied to the purchase price of the property.
A lease option is a form of owner financing and allows the renter to save up money to purchase a house they can afford. A lease option agreement starts out as a standard rental agreement and if the renter decides to purchase the house, another agreement that can last for a number of years is entered into.
Advantages and Disadvantages of Lease Options
Renter may end up paying more for a home than they would otherwise, but a lease option is a good choice for people who may be self-employed or have a sub-par credit rating.
In a seller financed situation, the renter could actually save money. Mortgages can cost more money than purchasing a rent to own property. In addition, normal rental properties can be small and cramped, while lease option properties generally are more spacious and in better condition.
One of the main advantages of a seller financed property or a rent to own property is that if you have a poor credit rating this option allows you time to improve your credit score and your financial situation. If you’ve lost your home to foreclosure, a rent to own property is a great way to get back on your feet.
If you’re interested in a lease option or rent to own property, check on the Internet or your local newspaper for properties that are available for purchase by lease option, owner financing, or rent to own. The advantages of a rent to own property far outweigh any disadvantage that may be contained in this type of agreement.
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