Rent-to-Own House Purchases

Posted on January 23 By MLP Lending Guide

Sometimes the prospect of purchasing a house can be extremely intimidating. Potential buyers often overlook several options that can ease the process of home purchasing. One of these options is the "rent-to-own" alternative. In a rent-to-own situation, the buyer signs a contract which is a mixture of lease and an option to buy the house within a certain period of time. Then, the buyer lives in the house and pays rent with an additional rent premium that will be credited to the purchase price if the house is bought. An "option fee" is also usually required, and can range from 1-5% of the purchase price of the house.

Essentially, the way rent-to-own leases work is by giving the buyer time to build equity, save cash, and repair credit. At the same time, the seller gets an opportunity to sell the house, as well as gain additional income from the rent premium and option fee. Furthermore, the seller's risk is lessened because even if the buyer does not exercise the purchase option, the seller gets to keep the option fee and additional rent premium, which would have gone toward the house in the event of a purchase. That being said, the "option period," the period during which the buyer can purchase the house, is usually less than three years. If this period comes and goes, and no other negotiations or arrangements are made between buyer and seller, then the lease is probably over and the seller will look for a new tenant to take the rent-to-own option.

The sale price and rent amount are determined by the market, but negotiations can be made, as with any financial dealings. If you are a buyer, make sure you do your research so that you are on equal footing with the often-knowledgeable sellers. Furthermore, buyers generally try to get a longer option period, so that they have more time to build up savings and prepare for the large purchase. Sellers usually try to get a shorter option period, so that the buyer is forced to purchase the house sooner and thus the seller will receive those funds. However, if the buyer selects a long option period and is never able to exercise the purchase option, they will lose all of the money that was invested via the rent premium and the option fee.

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13 Responses to "Rent-to-Own House Purchases"
  1. Robert and Penelope J 04, Oct, 2011

    were looking for a home rent-to-own, can someone please help rigth-a-way???????

  2. robert j 04, Oct, 2011

    i am looking for a home rent-to-own

  3. Vonnie Laguire 29, Aug, 2011

    The advantages of a lease option. There are advantages for both the landlord and the buyer. If the buyer does not have the bank or credit worthiness to get a mortgage but is still wanting to be a property owner then a rent to buy deal is a great option.

  4. Romona Lay. 18, Dec, 2010

    Brilliant mental math short cuts that will amaze everyone!

  5. android 03, Dec, 2010

    im kinda sick of the battery on my phone going down so fast, seriously annoys the poo outta me, see what happens, find a good site and BAM my battery is dead, so yeah, i luckily had enough battery to read this and post the comment haha, i have no life. yay me!

  6. Roy Dean 09, Jul, 2010

    If you are currently renting with the option to purchase or just looking to purchase call me(Roy Dean)at 214-906-5957 Contact me today for a free, no obligation analysis of your financing needs. If you go to the webesite I'm in the Dallas, Texas branch..Thanks

  7. Amberly Dadds 02, May, 2010

    I'm not sure if you plan on moving to Surprise AZ any time soon but http://www.SurpriseAZRealEstate.org has some amazing information on the area.

  8. john gibson 13, Dec, 2009

    i am in a house that already have a lease to buy with money already in .call john 8607787410

  9. Tricia 08, Jul, 2009

    Looking for a home in Arkansas to least to own purchase? thank you Tricia

  10. remo dipietrantonio 26, May, 2007

    hi my name is remo. i am looking for a rent to own or a lease to own. in mass. mladen/melrose/stoneham and more. cell 781-267-9780 thank you.


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