Our definition of rent to own covers two major categories:
1) Lease with an option to buy (lease option)
2) Contract for Deed
While it may be extremely difficult to find rent-to-own homes, they are available in all 50 states. As of now there does not appear to be a single resource for rent to own homes. The most common are existing “for sale by owner” (FSBO) listings that may be open to rent-to-own, otherwise you will need to find a specific rental property on Zillow, Facebook, or Craigslist specifically stating rent to own availability.
You rent the home with the exclusive option to buy it. You are not obligated to purchase the home but have until the end of the contract term to decide. This is called the lease expiration date. The owner cannot sell it to anyone else as you have control over the decision to buy or sell the home first unless a party breaks the lease agreements.
- Lease Option – sometime called rent-to-own, lease to buy, lease to own, lease purchase, rent to buy, or L/O. In this case, two agreements will be signed (lease agreement and option agreement)
- Contract for Deed -Sometimes called land contract or deed of trust is a single contract for deed document. This is signed and is a true sale of the home.
We always recommend trying to exhaust all resources to get a bank loan first. If you have been denied or just can’t quite pull it off in time, that is where Set Your Rent can help.
If you are currently renting or looking for a rent to own home, the biggest factors will be getting your financial house in order via saving for a down payment and ensuring you make at least 3 times your expected monthly payment.
Additionally, we recommend visiting with The Village Family Service Center in Fargo ND (they also offer online consultations) for debt, credit, and money consultation. We are not affiliated with The Village but believe they truly help people and are a great non-profit.
In most cases you act as the homeowner. Just like if you got a loan from a bank, the bank would not fix a toilet or a door knob. You have the pros/cons that go with home ownership. You get to fix things your way, make improvements that you want, and address any home issues as they come up. This is why we recommend an inspection be done on all properties prior to moving in so you are fully aware of age, condition, and likely future repairs for the home you choose.
Yes. An inspection is the safest way to ensure you will be protected and understand exactly what kind of home you are buying. Similar to a regular bank financed property and purchase agreement, an inspection is a choice but is always recommended.
Five things we look at:
- Do you have a sizable down payment?
- Can you afford the home?
- What is your past rental/criminal history
- Where is the property located
- Credit score (less important)
Any down payment or deposit you put down on the home goes towards the final purchase of the home. All the money is applied to the agreed upon sale price of the home. There is the rare situation in the event you no longer wish to purchase the home, your deposit is forfeited. The deposit is a key piece in being able to successfully own a home. We also stand buy our guarantee that we will not keep any deposit unless you get a home.
Lease Option gives you the “option” to buy the home whereas a Lease-Purchase is a contract to purchase home at an agreed upon later date. One has more flexibility while the other is more concrete.
This varies by property but typically 10-20% of payments are received back as principal pay-down or credits on final purchase.
We usually set 1-5 years as the standard but have gone up to 30 years.
- Walk away and lose deposit and credits built up
- Sell the home and option to someone else. This is recommended as you could possibly recoup the equity you have built in the property over the years.
You are. You act the homeowner.
You do not, however, since you are not paying any realtor fees, we would strongly recommend it as it may make the home shopping experience more positive.
If you are doing a lease option, it is highly recommended that you carry renters insurance.
If you are doing a contract for deed, you will be required to carry homeowners insurance
It is possible but not very likely.
In general yes. You are paying a premium so that part of your rent goes towards building equity.