Know More about the Rent-to-Own Scheme

When you plan to purchase a home, the contract would be signed shortly after both the parties accept the offer and the financial transactions are completed at the time of closing. Since a large number of buyers cannot afford to pay the total amount of money of the house, he can avail a mortgage from the bank or financing institutes. In this scheme the buyer pays a certain percentage of the total price and the rest is paid in equal monthly installments.

In order to qualify for the mortgage, the buyer is required to have a good credit score along with having the required amount of money for making the down payment. However if you cannot make the down payment and cannot secure the loan, you can choose another option of buying a house- the rent-to-own agreement. In this kind of contract, the buyer agrees to pay the rent for the property for a specified time period before purchasing the house and before the expiry of the lease.

This option can prove to be beneficial for a large number of home buyers as they can buy their dream house in an affordable manner.

The rent-to-own contract

In the agreement, prospective buyers can move into the house of their choice and can have enough time to improve their credits before making the purchase. While different states can have their own set of regulations, no two contracts are alike. In simple words it can be defined as a deal in which the buyer have to pay the rent for a specific period of time before buying the property however it comes with its sets of terms and conditions.

• Option Money

In this contract, the prospective buyers have to pay a onetime, non refundable fee known as option money. This gives the buyer an option to purchase the property in the near future. It is also essential to note that some lease-option contracts give the buyers the right to purchase the house after the expiration of the lease. However if the buyer is not ready to buy the house, the option simply ends.

• Purchase Price

The contract specifies the amount of money and the purchase time. In various cases, the seller and the buyer agree on a set purchase price while signing the contract. This price can be higher or at par with the market price. If given the option, buyers usually choose to "lock in" the purchase price in an increasing real estate market.

• Rent

During the lease terms, the buyer has to pay a specific amount of monthly rent. The terms and conditions are often negotiable however they range between one to three years. In a variety of contracts, a small percentage of the monthly rent is paid as the purchase price.

This is the best option for all those people who want to own a house but do not have the required finances. The agreement gives a chance to the home buyers to get their finances in order before they make a purchase. So if you are interested in owning a house but do not have the required money, choose the rent-to-own option.

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