Buy a House
Rent-To-Own (also called lease/option, and/or lease purchase) refers to a contractual arrangement between the tenant and landlord whereby the tenant rents the property, much like any rental arrangement you have had. The difference is that the tenant also has the GUARANTEED right or option to buy the property at an agreed upon price sometime during the rental period. This is kind of like a “rain check” at a department store. While the tenant has the OPTION to buy the property, he/she DOES NOT HAVE TO buy it. The landlord MUST SELL the property to the tenant at the agreed upon price, if the tenant so chooses.
Benefits to you of Rent-To-Own Housing
Depending on your particular situation, there are several advantages of a Rent-To-Own house over a standard rental house:
- Rent-To-Own allows you to move into your own house now, with a relatively small down payment, even if you have credit problems that would keep you from buying a house. Once you are in the house, we work with you to improve your credit over the next year or two, so you can easily qualify for a good loan.
- Once you have lived in the house for 1-2 years, we help you get a refinance loan, which is often easier and cheaper than getting a loan to purchase a house.
- Generally, you can treat a rent-to-own home like your own home. You can paint and decorate it to suit your tastes and make improvements you would never think of doing with a home you are just renting.
- A rent-to-own home let’s you “try out” an area or house before you are actually locked into a 30 year mortgage.
How Do You “Rent-To-Own” a House?
Rent-To-Own is a simple process! The tenants and landlord sign a Lease Agreement and an Option To Purchase Agreement, each about 2 pages long. Generally, the Lease Agreement on a Rent-To-Own home differs from a standard Lease Agreement in 2 ways: The Option To Purchase Agreement simply states that the tenant has the right to buy the property at a fixed price during the lease period.
How Much of an Upfront Option Payment Will I Need?
That depends on your monthly payment, gross income and the price of the home. However the upfront option payment can be as low as 2 - 5% of the sale price for most of our homes. In instances where you have a good steady income but insufficient funds for the option payment, we may be able to put you on a payment plan until you reach the option payment required. In most cases, 100% of you option payment is credited toward the purchase price of the home, so when you buy, you are using this towards your down payment on a new loan.
What Happens If I Don’t Buy At The End Of The Lease?
If you don’t purchase at the end of the lease, your option will expire and you will lose your option deposit and any additional money you have contributed towards option consideration.
I Still Want To Buy, But Can’t Get A Loan?
If during the term of the agreement you have put at risk your option in some way, by late payments, incorrect disclosures, or other breach of your agreement, we won’t be able to help you. If however you were on time and did everything you could, but still could not get a loan, we would work with you to try to give you another chance by extending the term of your lease. This would be decided upon by the individual owner/investor of the property
Can I Refinance The Home Before The End Of The Lease?
Yes, you can exercise your option to buy at virtually anytime during the lease period after 12 months.
What Kind Of Improvements Can I Make?
We want you to feel that the home is yours. You can make improvements, however we require that you notify us and obtain any required local permits and follow proper building codes.
Will The Price Of The Home Go Up?
NO! We “lock in” the price of the home for the duration of the option (usually 12- 24 months). At any time during that period, you can purchase the home for that fixed purchase price. By locking in the price at the start, you will know the price of the home and finance required, when you talk with traditional lenders later on.
Does My Rent Apply Towards Paying Off The Home?
Depending on your monthly payment, part of your payment may go toward the price of the home.
How Soon Can I Move Into One Of Your Homes?
We only show homes that are currently available for purchase. So if you see one of our homes advertised you can assume that you can move in immediately. If the property is unoccupied, you can finalize the paperwork and move in within 2-10 days!
Who Is Responsible For Maintenance And Repairs?
We would expect typically that you would treat your home like a homeowner. You’ll change the light bulbs, fix a leaking washer in a faucet, and keep the house and yard in a neat, clean and tidy condition, which means removing rubbish, keeping the lawn mowed, and not storing old cars in the yard etc. After all, all new buyers do that so why shouldn’t you? In effect, by entering this program, we trust that you are committed to becoming a homeowner, and we want you to take pride in the maintenance of your home. Remember when you the tenant look to purchase, if your home is in an untidy condition it would be unfavorable to financing with a traditional lender.
- There is an option fee paid to the landlord for the guaranteed, exclusive right to purchase the property during the lease term. This is similar to the down payment required on most home loans, but is generally less money. Typical option fees range 2% to 3% of the purchase price, depending on the home and your credit history.
If the tenant buys the property during the lease period, the entire option fee is credited to the tenant as part of his/her down payment. If the tenant does not purchase the property, or if he/she defaults on the lease agreement, he/she loses the option fee.
- Because the tenant is to become the owner of the house, typically the lease requires that the tenant be responsible for all day-to-day maintenance and repairs under a fixed amount (usually under $400). All this means is that you will fix the leaky toilet, change the light bulbs, etc. If the furnace or roof needs replacing, the landlord is responsible for those major repairs.