Learn about the Pros and Cons of Rent-To-Own Agreements

It's important to know about the pros and cons of a rent-to-own home, and be fully prepared before signing a contract. It can be a challenge to find a home that meets your needs, while being within your budget. When you do find a home you'll be better equipped to make the right decisions to move forward.

The Pros of a Rent-To-Own Agreement

• As the future buyer, you are typically not required to have as strong a credit score or a full down payment of 20 percent, as you would in a conventional mortgage.
• Rent-to-own transactions allow the renter to build equity over the course of the rental period as a percentage of your monthly rent will go towards your down payment.
• Consistent payments over the course of the rental period allow you to establish a track record, improve your credit score, and demonstrate you’re a good candidate for a mortgage.
• Rent-to-own sellers may require potential buyers to enter a credit-counseling program that will establish a budget to improve their financial situation.
• A rent-to-own contract locks in a purchase price and protects from increases in prices due to market fluctuations.

The Cons Renting-to-Own a Home

• Negotiating the terms of a rent-to-own home can be a complicated process when sellers offer less than fair terms to potential buyers. Tenants may find themselves taken advantage of when the provisions in the agreement are not favorable towards home ownership at the end of the rental period. You should always have a real estate lawyer examine a contract prior to signing.
• If your area is experiencing low inventory, you may want to reach out to sellers who list their home as “for sale” and ask them to consider offering it as a rent-to-own home.
  • Note: you can also find more listings on our site where we offer an extensive nationwide selection of affordable rent-to-own properties
• You could forfeit your rent-to-own home altogether if you do not qualify for a mortgage at the end of your rental period. You will also lose any money allocated towards the purchase price. You may be forced to restart the home-buying process from the very beginning.
• Your landlord could lose the property through a foreclosure, resulting in the loss of your opportunity to own the home at the end of your transaction as planned.
• Title issues may surface and cause you to forfeit ownership as you seek to purchase the home.
• As with other rental properties a rent-to-own listing could turn out to be a scam, so be cautious when exploring properties.

There are pros and cons to consider before choosing a rent-to-own home. Avoiding the pitfalls, learning about the agreements, and setting up a budget can put you on the right path.