Simply put, rent-to-own is renting with the option to buy. The deal is setup using an Occupancy Agreement and an Option to Purchase Agreement. With rent-to-own, then tenant-buyer has the option to purchase the home at a pre-determined price within a given time period.
Rent to own is also known as lease to own, lease option, lease purchase, or rent to buy.
Benefits of Rent to Own
- Use a lower down payment
- Build equity (through monthly option credits)
- Build sweat equity (through building improvements)
- Avoid expensive closing costs
- Take time to repair/re-establish credit
How Does Rent to Own Work?
- The tenant-buyer puts forward a small down payment. This is credited towards the purchase price when they purchase.
- The tenant-buyer makes monthly payments and a portion of each payment accumulates additional down payment funds which are also credited towards the purchase price when they purchase.
- During the rent to own program the tenant-buyer works to establish or repair their credit.
- At the end of the program the tenant buyer applies for financing through a conventional lender.
- With an accumulated down payment and a mortgage pre-approval, the tenant-buyer purchases the home and officially becomes a homeowner!
See our Homeowner Prep Program for more details.