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New Buyers Guide

Try Before You Buy – How Rent-to-Own Programs Benefit You

In a Rent to Own program, you get to rent a house for a determined period of time. Then, once the term is over, you have the option to purchase.

Let’s say you’re shopping for homes and you come across “the one.” You find the perfect house, but the price is a little out of reach. Maybe putting 20 percent as down payment, or low credit scores prevent you from loan qualification.

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Whichever the case, a Rent to Own program might allow you to secure the house of your dreams. That way, you can move into the home, lease it for a few years, and then buy it for the price you agreed on when starting the contract.

What is a Rent to Own?

Homes that are difficult to sell are sometimes listed as “rent to own.” Instead of buying the home then and there, an interested buyer has the option to lease the home and the purchase it later on. The seller agrees to sell it to you at a specific price in one to three years, without putting it on the market.

During this time, you will lease the home for an agreed upon amount.  You usually have the option to buy the house before the end of the lease period. The lease works like rent, you pay the seller monthly as you would your landlord.  The amount goes towards their mortgage and then a certain percentage goes towards the down payment and the purchase of the house.

How do Rent to Own Program work?

Typically, when a home is listed as rent-to-own, the seller will require an option fee at the beginning of the lease period.  It is similar to a deposit. A normal option fee is around 5 percent of the purchase price of the home.  If you decide you do not want to purchase the home, it is typically non-refundable.  Some sellers allow you to put the option fee towards the purchase price or down payment after the lease period is over.

During your lease period, you will pay monthly rent to the seller.  The seller will not put the house on the market unless you decide you do not want to purchase it.  They also have to sell the home to you at the price you contracted at the beginning of the lease.  You can often negotiate a rental credit, which puts a portion of the monthly rent you pay towards the eventual purchase of the home.

How Much Does Rent to Own Cost?

The option fee is typically five percent of the home price, which can be negotiated with some sellers.  If the purchase price is $100,000, you will need to put $5,000 down as the deposit, which you may be able to use for the down payment when you purchase the home.

If the monthly rent would normally be $1,000 per month, the seller may increase this to $1200, and the extra $200 per month will be used as a credit for when you purchase the home.  At the end of the three-year period, you will have already paid $7,200 towards the down payment or purchase.


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Stop! If you need financial assistance such as money to pay bills, a personal loan, or debt relief. See what resources are available to help you today.

Resources for Me

What if I Don’t Have Good Credit?

One of the main benefits of a rent to own program is the ability to build your credit over the lease agreement so that you can qualify for the mortgage.  Before entering a rent to own program, you should talk with a loan officer to see what you can realistically qualify for in your timeline.

Sellers are more concerned with whether or not you can make the monthly payments.  They are less affected if you decide you can’t afford the house, because they are profiting monthly, can sell the house later on, and can keep your option fee.

Benefits of Lease to Own Programs

  • Your monthly rent goes towards the final sale of your new home
  • You have time to save for the down payment
  • Many sellers allow the option fee to be used towards the down payment
  • You have time to work on improving your credit score
  • You can secure a house now, and the price will not go up even if the market does

Rent to own programs allow you to put your monthly rent payments towards a purchase of a home.  If you find a home that you love, you can enter this program and pay rent for one to three years and then at the end of the rental period, purchase the home. 

When you enter a contract with the seller, they agree to sell it at a specific price. Even if the market goes up and the home is valued higher, you still get to pay that amount.

Instead of renting, you are leasing.  A percentage of your monthly rent goes towards the purchase of the house in the future.  Rent to own programs are great for those who want to buy a home but do not have enough saved for the down payment or a high enough credit score.  The leasing term gives you time to save up and work on your credit score.