Some potential homeowners who are not able to purchase a home right away consider rent to own options instead. A rent to own option, often referred to as a lease, is essentially a rental contract for the rental of a property which includes the stipulation that the renter will be given the option of purchasing the property at the conclusion of the lease. This type of rental agreement may not be worthwhile for all renters but there are some who will find this type of agreement to suit their needs quite well. In particular renters with bad credit who might be unable to buy a home otherwise and renters who aren’t quite sure they really want to buy a home. It can also be a worthwhile agreement for homeowners who are planning to sell their home buy may not want to sell it immediately.
When Your Credit is Bad
Potential homeowners with bad credit may find a rent to own situation may be just what they are looking for to help them purchase their dream home. There are a variety of financing options currently available and it is likely even homeowners with poor credit can find a financing option but it is not likely this option will be favorable. Homeowners with poor credit are often shackled with unfavorable loan terms such as higher interest rates, requirements to pay points and adjustable rate mortgages instead of fixed rate mortgages. In these situations, it might be worthwhile for the renter to repair his credit before attempting to purchase a home.
One of the best ways to repair credit is to maintain good credit in the present and into the future. Most blemishes on credit reports are erased after a certain period of time. Renters who have poor credit can work on repaying their current debts in a timely fashion and with time their credit score will improve. During this time participating in a rent to own program allows the renter additional time to repair his credit and may also allow the renter to accumulate financial resources which will enable him to purchase the home when the lease period is over.
When You Just Aren’t Ready to Buy a Home
Some renters opt for a rent to own program when they aren’t quite sure they really want to own a home. In these types of agreements, renters are given the option of purchasing the home at the end of the agreement period but they are not obligated to purchase this home. This allows the renter to see what it is like to own a home without having to commit to homeownership.
Renters who are renting a home may learn a great deal about homeownership during the rental period. This may include information about maintaining the landscaping of the property and dealing with conflicts with neighbors. It may also entail caring for and maintaining a significantly larger domicile than most apartment renters have to maintain. Some renters are not quite sure they are ready to handle all of these issues and may use a rent to own agreement as a trial period to determine whether or not homeownership suits them.
When the Homeowner Just Isn’t Ready to Sell
Some homeowners offer a rent to own option when they plan to sell their home but do not want to do so immediately. Some homeowners may be hoping for property values to rise before they sell their home so they can either regain the amount they have invested in the house or profit from the purchase price of the home. These homeowners might choose to rent out their home during this time and offer the renter the option of purchasing the house after a set time period. This enables the seller to earn an income from rent while they are no longer living in the home. The rent they charge to the renter is often enough to cover the mortgage and yield a profit making it a financially wise decision for the seller.