Rent to Own/ Lease With Option to Buy

Rent-To-Own Or Lease-Option Allows Buyers To Achieve Their Dream Of Being A Home Owner

In a chaotic real estate market, a rent-to-own or lease-option may be a great opportunity for a potential homebuyer. It is not exactly a for sale agreement. It is actually a lease, in which the seller rents a house to the buyer. The buyer pays a monthly rent as well as other expenses. The catch is that the terms of the lease are locked in for the future home purchase.

During the agreed upon length of the lease, the potential homebuyer pays a monthly rent to the seller. The seller acts like a landlord. This option can be beneficial to both the buyer and the seller. The buyer pays the lease amount to the seller. The seller receives the and usually applies rent credits towards the buyers down payment then sells the house to the buyer. The buyer gets the house without having to pay a hefty down payment.

Even though it seems like a great opportunity, a rent-to-own or lease option can have some drawbacks to consider.

Buyers could lose their whole investment if they fall behind on the monthly payments. Depending on how much the payments are and how long the buyer actually made the required payments, that can easily add up to a lot of money.

If this happens, the buyer should talk with the seller to see if they could re-negotiate the lease contract. If the talk does not lead to a new lease contract, the buyer does have the choice to continue with the original lease or decide to stop making payments. If the buyer stops payments, he or she will lose the whole investment and may take a hit on their credit report if they originally gave up their social security number and birth date. Which I strongly advise not to give up because of possible scams and identity theft.

The buyer may also want to consider a credit course to educate themselves as well as improve their credit to secure financing at the completion of the lease contract. The buyer needs to make all payments on time and ask the seller if he or she could sign a basic statement saying that you made all payments on time. You would then send that letter with your information to all three main credit bureaus. Equifax, Transunion and Experian

You should not be discouraged about entering a rent-to-own or lease-option. With the real estate market seemingly turning the corner, it is the perfect time to buy your first or second home using this option.