What You Need to Know About Rent-to-Own
Key Benefits for Rent-To-Own
- Get started on a home loan when you can’t qualify for a traditional bank loan
- Build your credit and job history while living in your dream home
- Build equity each month as you live in the home
- You control the home, without actual owning it.
Potential Risks for Rent-to-Own
- If you don’t buy or sell the home, you can lose your down payment and equity
- It takes time. It can take 1-5 years to obtain a bank loan
- You act like the homeowner and are in charge of some home maintenance and repairs
A rent to own contract is a way for an individual or a family to begin to reap some of the benefits of home ownership without having to be lender approved or put down a large down payment on a home. With a rent to own, there are fewer barriers to entry than one might typically see when they are looking into home ownership.
Traditional lenders adhere to a strict set of qualifications that borrowers must meet in order to obtain a bank loan. In a rent to own, these qualifications are much easier to meet. An individual’s credit score is often the determining factor that will cause them to not be approved for a traditional bank loan.
Through a rent to own program, tenant buyers are able to start living in the home of their dreams right away while they work to get their credit and finances in order. Most often you will need to find homes that offer rent to own availability, which can be difficult. Our process is a little different. The tenant buyer will pick out a house that is listed “for sale” that they are interested in. Set Your Rent buys the home and in turn rents it back to the tenant buyer for a term of 3-5 years.
Each month that the tenant pays rent, it gets reported to a credit agency which increases their credit score. In addition, each month, a chunk of the tenant buyers monthly payment goes towards their future down payment on the home. There is a set purchase price that is included in the lease that is predetermined and gives the tenant buyer exclusive rights to purchase the home at any time during their lease. You cannot be forced to move.
If the tenant buyer is unable to purchase the home during their initial lease, they will be able to extend their lease and keep accumulating money to go towards their down payment. If after the initial lease the tenant buyer decides the home just isn’t for them, they are able to 1) walk away without the financial burden of holding onto the home or 2) sell the home.
“If I were asked to name the chief benefit of the house, I should say: the house shelters daydreaming, the house protects the dreamer, the house allows one to dream in peace.” — Gaston Bachelard