Rent to own is a great option for home buyers who do not qualify for a traditional mortgage. You may not have the money for a down payment on a mortgage, or perhaps your credit score is too low to qualify for a bank financed mortgage. If either of these are the case, it is good to know that there are still options for owning your own home.

What You Will Pay

To get into a rent to own home, you will generally need to put down a deposit. The deposit is usually a percentage of the overall price of the house, and it should go toward your final purchase of the house. While traditional mortgages often call for up to 20% down, rent to own homes generally ask for a smaller, more affordable deposit.

What you pay monthly will be determined by your deal with the seller. You will need to pay the rent, which is just like a traditional rent. On top of that, you may structure a payment or a portion of the rent to go toward your premium. The premium is the amount you still owe on the home, after your deposit is taken into account. Unlike a traditional mortgage, you rent payments do not count toward the purchase price of the home. You will pay down the final cost of the house be making an extra premium payment every month.

How Long Will You Rent

The length of time you will rent will be determined by your contract with the seller and your own situation. Usually, the rent to own portion only lasts 1 to 3 years, at which point you will be able to buy the house for the price you agreed on in the contract.

At the end of the contract, you will have paid some money toward the final price of the house. You will be in a much better position to buy the house outright using a traditional mortgage. Some sellers will even help you build your credit back up and secure a mortgage.

If at the end of the contract you are not able to secure a mortgage or purchase the house outright, you may be able to renegotiate with the seller. Be sure to plan ahead and learn about your options before you sign the initial contract. You will usually be putting your deposit at risk if you do not end up buying the house at the end of the contract.

What If You Aren’t Sure You Can Buy

In some cases, you may be unsure whether you will be able to secure a mortgage and buy the home at the end of the contract. An alternative option that you may want to consider is a Lease Option contract. That is a contract that basically sets you up to rent the house with an option to buy it at an agreed upon price after a certain amount of time. You are not bound to buy the house at that time, but you may still have to waive any deposits. The nice thing is you will not have to renegotiate if you want to move on. A lease option is very similar to leasing a car with an option to buy it or turn it in at the end of the lease.

Is It Right For You

Determining whether rent to own is right for you should take several things into account. First of all, why can’t you qualify for a traditional mortgage? If you have a temporary credit problem, renting to own may give you the cushion you need to repair your credit. However, if you have chronic credit problems, maybe you need to work on repair and maintaining good credit before thinking of buying a house. Likewise, if you do not have enough money for a traditional down payment, you need to ask yourself why. Run the numbers and figure out if renting to own will help you save money, and also figure out if you can create a budget to set aside some income. You will still need to put a deposit down for a rent to own house, but the nice thing is you will not have to save up as much.

Rent to own may in fact be a great solution for you. It could help you get out of the rental cycle and start you on your way to home ownership. This is especially true if you have a premium payment figured in to your rent that will go toward the final purchase price of the home. This means some of the monthly bill you are paying will now be applied toward owning your own home.

Finding Rent to Own Houses

Finding a house that you can rent to own can take a little work. Usually, real estate agents are only interested in selling homes outright, since they collect a commission on the sale.

When a seller rents you a house to buy in the future, he or she is giving up some of the immediate cash of the purchase and trusting you to make your payments and buy the house in the future. Most people who are selling their homes will not be willing to do this. Your best bet is to work with a house investor. This is a person or company that buys and sells houses.

You can find investors by searching house for sale listings, looking at for sale by owner houses, and searching online on Google and Craigslist. If you see listings in the paper or on signs for people who buy houses, usually with some form of We Buy Houses slogan, these are usually investors who also sell houses through various means, including rent to own.

An investor may have a house for sale that is perfect for you. If not, he or she may be willing to look for a house that fits your needs, buy it, and then set you up with a rent to own contract. If you find the right person to work with, you will have a great experience and be well on your way to owning your own home!

This article is by Bradford Shimp. To learn more about this subject, please visit http://bornagainhouses.com

Author: Bradford Shimp
Article Source: EzineArticles.com
Provided by: Digital Camera News