Rent to Own Your House

Renting to own has advantages for sellers and buyers as a popular alternative when too many homes are for sale. However, it is easy to confuse this alternative with a lease option. With a lease option, a renter might have the right to purchase the home in the future should a contract be presented. In a true rent-to-own scenario, also called lease purchase, the renter signs a contract, but with an extended closing date, often as long as several years.

The buyer

When creating the contract, as a buyer you can agree to the purchase price of the home in advance and put down in writing the monthly amount you want to contribute to the down payment. This is an advantage, as purchasing a home outright often takes a large down payment, something that might be hard to come by in tough economic times.

In addition, the prolonged closing date allows you to improve your credit to increase chances of mortgage approval and to get a lower rate. Use the time wisely, because you might forfeit the deposits if you can't qualify for a loan once the time is up.


While looking at credit reports is not pleasant, do it anyway, because they often contain errors. It is easy enough to get these items cleared up; just contact the credit bureau. Meet with a mortgage lender beforehand, even if you know you don't qualify for a loan.

By meeting with a mortgage lender, the lender can point out what is standing in your way of a mortgage and also discuss the debt ratio, amount of down payment and types of loans you might want to consider working towards. That way you'll know what price points to include in your lease purchase documents, and you'll get an idea about what you can afford.

The seller

As a seller, you might find it hard to find a qualified buyer in economically challenging times, especially when competing with other homeowners. Offering a buyer the rent-to-own option will give you a rental income that you can use toward paying the existing mortgage. You can also evaluate a prospective buyer to see if he is responsible and treats the property well.

Because you can write a nonrefundable deposit into the lease purchase contract, you won't lose out if the buyer fails to make arrangements in time to qualify for the appropriate mortgage.

Loose ends

As a buyer, it is important to research home prices to avoid paying too much for a deposit. You can obtain the assistance of a real estate professional, who has the proper resources to determine what comparable homes have sold for. Hire an attorney to perform a title search to see if the home will really be yours when you finally close.

You should involve an attorney when drawing up the rent-to-own contract, whether you are buying or selling. Before signing anything as a renter, hire a home inspector to make sure the home does not need major repairs; at the very least, you will be able to negotiate repairs with the seller.

If these seem like unwarranted expenses, remember that buying a home the regular way involves agents, attorneys and home inspectors, as well.

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