Rent-To-Own (also called lease/option, and/or lease purchase) refers to a contractual arrangement between the tenant and landlord whereby the tenant rents the property, much like any rental arrangement you have had. The difference is that the tenant also has the GUARANTEED right or option to buy the property at an agreed upon price sometime during the rental period. This is kind of like a “rain check” at a department store. While the tenant has the OPTION to buy the property, he/she DOES NOT HAVE TO buy it. The landlord MUST SELL the property to the tenant at the agreed upon price, if the tenant so chooses.

Benefits to you of Rent-To-Own Housing

Depending on your particular situation, there are several advantages of a Rent-To-Own house over a standard rental house:

1. Rent-To-Own allows you to move into your own house now, with a relatively small down payment, even if you have credit problems that would keep you from buying a house. Once you are in the house, we work with you to improve your credit over the next year or two, so you can easily qualify for a good loan.
2. Once you have lived in the house for 1-2 years, we help you get a refinance loan, which is often easier and cheaper than getting a loan to purchase a house.
3. Generally, you can treat a rent-to-own home like your own home. You can paint and decorate it to suit your tastes and make improvements you would never think of doing with a home you are just renting.
4. A rent-to-own home let’s you ‘try out’ an area or house before you are actually locked into a 30 year mortgage.

How Do You ‘Rent-To-Own’ a House?

Rent-To-Own is a simple process! The tenants and landlord sign a Lease Agreement and an Option To Purchase Agreement, each about 2 pages long. Generally, the Lease Agreement on a Rent-To-Own home differs from a standard Lease Agreement in 2 ways:

1. There is an option fee paid to the landlord for the guaranteed, exclusive right to purchase the property during the lease term. This is similar to the down payment required on most home loans, but is generally less money. Typical option fees range $5,000 to $15,000, depending on the home and your credit history.
   
   If the tenant buys the property during the lease period, the entire option fee is credited to the tenant as part of his/her down payment! If the tenant does not purchase the property, or if he/she defaults on the lease agreement, he/she loses the option fee.
2. Because the tenant is to become the owner of the house, typically the lease requires that the tenant be responsible for all day-to-day maintenance and repairs under a fixed amount (usually under $400). All this means is that you will fix the leaky toilet, change the light bulbs, etc. If the furnace or roof needs replacing, the landlord is responsible for those major repairs.
   
   The Option To Purchase Agreement simply states that the tenant has the right to buy the property at a fixed price during the lease period.

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