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1. How Does Rent to Own Work?

How Does Rent to Own Work?

Rent to own is the process of renting a home with the option to buy any time before the end of the lease term.  The tenant / buyer typically pays a nonrefundable option fee which goes towards the purchase price at closing.  The option fee gives the tenant / buyer the legal right to buy the home.  Additionally, some sellers offer monthly rent credits which go toward the purchase price or closing costs.  Rent to own allows you to try out both the house and neighborhood before committing to buy, while giving you time to fix your credit and qualify for a loan.  For more information, see our rent to own info graphic (Insert Link), and visit our resource center for tons of resources, news, and articles.

2. Is Rent to Own Right for Me?

Is Rent to Own Right for Me?

Rent to own is not for everyone, but can be a tremendous choice in many circumstances.  Try our rent to own decision tool to see if it’s a good fit for you and your family.

3. Where Can I Get Additional Information?

Where Can I Get Additional Information?

If you are looking for in depth information on rent to own, lease purchase, owner financing, and other alternative forms of real estate visit our resource center to find articles, downloads, and more!

4. Pros and Cons of Rent to Own

What are the Pros and Cons of Rent to Own?

The benefits of rent to own are as follows:  You don’t need a significant down payment, poor credit is not an issue initially,  you get to “try out” your future home and neighborhood, and it gives you time to clean up your credit, and save up for a mortgage down payment.

The cons of rent to own are as follows: If you can’t qualify for a loan at the end of the lease you will lose your down payment and rent credits, mortgage rate and home price variable could work against you if rates go up or home prices go down

5. How Do I Find Rent to Own Homes?

How Do I Find Rent to Own Homes?

When searching for rent to own homes you have a few options:   The first option is too look for listings on online classified websites such as craigslist or backpage.  The major benefit of this approach is that there is no cost.  The downside is that you have to look through thousands of listings, many of which are fraud.  For a full list of scams and how to protect yourself, read our blog post here.

The second option is to hire a real estate agent that will help you in your search.  This is a great option if you can get a Realtor to work with you that understands the process, however the majority of Realtors only work with traditional buyers and don’t understand how rent to own works.

Another option is to drive the neighborhoods you like and find sellers that are both selling and / or renting.  You can talk with them and see if they’re willing to rent to own.  There is no cost associated with this option and works well if you can find a seller willing to work with you.  The downside is that its extremely time consuming and there’s no guarantee that you’ll find a willing seller.

The last option is to sign up with, which is a service that compiles all the listings into one convenient location.  You can instantly search through our database of over a million properties that include rent to own, owner financed, for sale by owners, for rent, foreclosures, short sales, and bank owned homes.  While there is a small cost, the website connects you directly with the sellers immediately without the need to even leave your chair.

6. Who is Responsible for Repairs, Taxes, and Insurance?

Who is Responsible for Repairs, Property Taxes, and Insurance?

In a standard rent to own, the seller still owns the house during the lease period and is responsible for all major repairs, property taxes, and maintaining property insurance.  Lease agreements vary and the tenant / buyer may be responsible for minor repairs.  Be sure you know what you’re signing, and have a real estate attorney review all contracts.

If you are buying the home with owner financing, then you are the legal owner and responsible for taxes, insurance, and all repairs.

7. What is a Rent Credit?

What is a Rent Credit?

A rent credit is when a seller gives a tenant / buyer a monthly credit that goes towards the purchase of the home.  Rent credits are a great way to build immediate equity and help with closing costs before you buy.  For example, a seller gives a $300 per month rent credit for the full 24 month lease term.  At the end of the lease, the buyer has  $7200 to use towards the purchase.

8. How Do I Fix my Credit?

How Do I Fix my Credit?

Fixing your credit is the first step to ultimately performing on the rent to own and buying the house.  The first step is find out where your credit stands, and then create a plan for improvement.  You can check your credit by using one of our approved vendors, and create a plan by either talking with a mortgage professional, a credit counselor, or do it yourself.

credit components

A number of factors go into your credit score including:  Payment history (35%), amount owed (30%), length of credit history (15%), types of credit in use (10%), and new credit (10%).  If you plan to start the process yourself, read our 5 Step credit repair checklist.

9. How Do I Qualify for a Home Loan?

How Do I Qualify for a Home Loan?

Qualifying for a loan is the most important steps in eventually buying your home. One of the biggest mistakes people make is wait until the end of their rent to own time to start the process.  We recommend starting the loan qualification process immediately as you will have a much higher probability of success.  The best strategy is to contact a mortgage broker at the beginning of the process.  Most good mortgage brokers will create a step-by-step plan to get you qualified.  The factors that lenders use to qualify you for a loan include: Credit score / history, income, job length / history, down payment, and overall ability to repay the loan without default. For a full article on this topic visit our post on the modern mortgage and how to qualify for a loan.

10. How Much is an Option Fee (Down payment) for Rent to Own?

How Much is an Option Fee (Down payment) for Rent to Own?

The initial nonrefundable option fee paid to the seller is totally negotiable and varies in every transaction.  That being said, we’ve seen the national average to be anywhere from 1 %– 5% of the purchase price for a standard rent to own, and between 10-20% if the seller offers full owner financing.