While there’s no “standard” rent to own agreement, there should always be two separate agreements (one for the lease and one for your option to purchase). This is an integral part to your success in any rent to own program.
Rent to Own Agreement
Each rent to own agreement serves a purpose and there are definitely clauses that should be included in each agreement to ensure that you are protected. The rent to own agreement can be complex so it is always best to ensure that you have a lawyer review the agreements so you understand the financial implications as well as your rights as a tenant-buyer.
Another piece of advice we want to pass on is that you should always have an idea of what it will take for you to qualify for a loan or mortgage at the end of the rent to own arrangement. This could mean different things to different people – for example, if the rent to own company you are considering does not offer a credit repair program as part of their program, consult with a mortgage broker before you enter a rent to own so you can create a credit repair road map or plan. Crafting clear credit goals is a must in order to succeed in a rent to own.
Below is a list of terms that you should ensure are covered in the agreements to protect yourself (we cover a more complete list of items in our book, Rent to Own: The Essential Guide for Homebuyers)
- How much of the monthly payment is going to your down payment.
- How much the price of the house will be when you are ready to purchase (this eliminates the ability of the owner to “change” the price as the term comes to a close.
- What are the terms around letting the owner know your intentions for buying the house (how many months notice do you have to give).
- How much of an initial down payment you put towards the rent to own.
- Who is responsible for maintenance and repairs
If you do your research, you should have no problem succeeding in a rent to own. Although a biased opinion, I believe there are more benefits than negatives for a potential rent to own candidate. You must weigh the good and bad for you and never hesitate to ask questions, this is the only true way to get the answers you need.
Don’t take a “no” from the bank as a rental life sentence, rent to own is a great alternative financing option that can get you on the path to homeownership today.