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How to Buy a House Rent to Own

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How to Buy a House Rent to Own

If you’re ready to buy the home of your dreams, but your credit or savings isn’t quite ready yet, a Rent To Own approach may help you move in tomorrow. Rent To Owns, in which you lease (rent) a property and have the option to buy the property during or at the end of the lease term, can allow you to control the home that you want. A lease option may also be helpful if you need some time to improve your credit before getting a mortgage.


  1. Determine if a “Rent To Own” is a good option for you. A Rent To Own can be a useful home buying tool, but they’re not for everybody. Ask yourself a few questions before you decide to pursue a Rent To Own:
    • Can you afford the option fee? The option money or option fee is required for a Rent To Own contract to be valid. This upfront option fee is generally 5-10% of the purchase price. All of this money should go toward the purchase price or down payment on the home when you decide to buy the home during, or at the end of the lease term. But unlike a security deposit, you don’t get the option money back at the end of the lease if you can’t purchase the house, or decide not to.
    • Do you plan on staying in the area? Since a lease option typically costs slightly more than simply renting, you should be reasonably certain that you want to buy the house at the end of the term.
    • Will you be able to secure financing at the end of the lease term?
    • In some cases, the Seller will finance the purchase of the home at the end of the rental period. Most of the time, however, the buyer will need to find his or her own financing by applying for a loan. A Rent To Own can help you get a more favorable loan then you otherwise would be able to, but it’s no guarantee, so you’ll want to be reasonably sure that you’ll be able to qualify for a loan at the end of the term. We will have you meet with a local mortgage broker/loan officer to examine your current situation and determine if you should be able to qualify for a mortgage before the end of your option period.
    • Will you be able to make the monthly payments on the home and meet other expenses of ownership? Even if you’re able to get the loan, it won’t do you any good if you can’t afford to keep up with the expenses of owning the home. We want you to be sure to factor in not only the mortgage payments, but also property taxes, insurance, and maintenance costs, all of which renters usually don’t have to pay.
  2. When we find you a home that you want to buy. Keeping the above considerations in mind, we will help you look for a home that you like and that you can afford.
  3. Negotiate the terms of the lease option. The purchase price, term of the lease (usually anywhere from 12-36 months), the amount of initial option fee, and the amount of the monthly payments that will go toward the purchase price will all be negotiable.
  4. Pay an option fee and sign the contract. The option fee is the upfront “consideration” that is necessary to make the contract binding. Pay this and sign the contract only once you are sure you understand all the terms of the agreement and you agree with them.
  5. Check on your insurance needs. Since you now have an interest in the home, you may require additional insurance to protect the home. Check with your insurance agent to find out what coverage you need.
  6. Make monthly payments. You will make monthly payments just as you would make rent payments. In many cases, however, a portion of the monthly payment sometimes can be designated as “rent credit”. This money will go toward the purchase of the home when you close on the purchase. It is likely to be a small percentage of the monthly payment.
  7. Make improvements on the home. If the home inspection turns up minor problems, or if the home needs a little remodeling or cosmetic care, it is probably in your best interest to try to take care of these things. By increasing the value of the home with improvements during the lease term, you earn equity (so-called “sweat equity”) in the home because the agreed-upon purchase price stays the same. This increased equity may help you get a more favorable loan when you purchase. In essence, by increasing the value of the home you are increasing your down payment.
  8. Apply for a loan. Our process has you in front of a local mortgage professional before you sign any agreements. The mortgage professional will pull your credit (don’t worry, we will help you repair your credit if needed), verify your employment, income, and debt to income ratios. All this will make sure that you are not getting in to a contract to purchase a home that you could not possibly qualify for. You should begin your application process immediately, even though you will not be purchasing your home for a number of months. To be safe you should probably work to be fully qualified for your mortgage a full two months or more before you need to buy your home. In any case, it’s essential to have a mortgage ready to close on the home by the date specified in the Rent To Own contract.
  9. Close on the Purchase Of Your Rent To Own home. Now that you’ve lined up your financing and closed on your Rent To Own home, congratulations. You are now a PROUD homeowner.

Tell us what type of house you are looking for at: http://fchomesbroward.com/looking-for-a-home  or give us a call now at (786) 505 8884.

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