Some property owners are looking to sell their homes. Others choose to rent their houses to tenants. However, there is an arrangement that combines both of these options into one. You may rent a home for a period of time and then pay to purchase the residence, otherwise known as a rent-to-own agreement.
Many people like to buy their homes at the outset. However, circumstances in your life might not permit you to purchase a house at the present time. Chron explains a number of reasons why people sign a rent-to-own contract.
The need for a fast relocation
Some homebuyers just cannot wait to move out of a neighborhood. A new job may be waiting in another community. A family might want to relocate to take advantage of a new school for their children. If time is of the essence, a seller may offer a rent-to-own agreement to allow the homebuyer to move in quickly and then spend a couple of years setting up financing for a mortgage.
Giving time to resolve financial problems
Not everyone who seeks a mortgage has a good financial history. A bank could refuse you a mortgage because of past bankruptcy or foreclosure. A rent-to-own agreement may give you time to repair your credit. In fact, making rental payments could show a lender that you have a stable income and can handle regular payments.
Consider possible downsides
A rent-to-own agreement is not for everyone. Paying rent on the home may prove more expensive than you anticipate because rent-to-own agreements generally require more rental fees than just renting a home with no plan to buy it.
In addition, if you come to the end of the rental period without securing a mortgage, you could lose the home and any money the seller will not refund. Your credit could take a hit as well. While a rent-to-own arrangement may benefit you if you can afford it, take careful note of all obligations in the contract before signing it.