Many people have asked us recently what rent-to-own means. Essentially, rent-to-own is an alternative way to buy real estate. One circumstance where it might be the best way to purchase a home is when a buyer is unable to obtain a conventional mortgage due bad credit, no credit, or an unfavorable debt to income ratio. Self-employed people with no income, unstable income, or low income may also want to take advantage of a rent-to-own home purchase.

Rent-to-own allows you to see if homeownership is right for you. Another benefit is that it allows you to get into a highly desirable neighborhood. There is typically a very low inventory of rentals in areas with great schools and amenities; with rent-to-own, you can live in a nice community even if you can’t obtain top-shelf financing. It’s a double benefit because it allows you to establish and build your credit so that one day you will be able to qualify for traditional financing. You get to do all of this while living in the home and area of your dreams!

While there are many benefits, there are some also costs associated with rent-to-owns you need to be aware of. Consideration money is typically 5% of the value of the property and is not refundable in the event that you decide not to purchase the property. You’ll still have monthly rental payments while living in one of these homes, and failure to make payments on time will really hurt your credit.

Every rent-to-own situation is unique, so we recommend consulting with one of our professionals to discuss your options. If you have any general questions about this or any other real estate topic, we are always available to help as well. We looking forward to hearing from you soon!