Rent-to-Own is an Alternative to Traditional Home Buying
The current real estate market is lending itself to rent-to-own home sales. Why are many prospective home buyers considering this option? There are many reasons behind the rent-to-own home buying trend in today's real estate market. To some buyers, renting your home before buying, doesn't make sense. There are however many valid reasons why rent-to-own may prove to be a perfect fit. To determine if a rent-to-own contract may work for you, you must first understand what it means to enter into such an agreement. Here is a brief overview of why you might consider rent-to-own home buying.
Rent-to-Own Builds Up Your Credit Rating
One of the reasons why you may choose a rent-to-own property is to build up credit scores before attempting to apply for a home loan. You should always improve your credit rating before applying for a home mortgage loan. Lending companies look closely at credit ratings when qualifying people for loans. Your rent payment is actually building up your credit score. At the same time, you can work at reducing your other debts, such as credit card debt, car loans and student loans.
Practice the Responsibilities of being a Homeowner
Renting-to-own will also give you a foretaste of the responsibilities that come with home ownership. This can be a valuable period to assess your role as a homeowner and to become familiar with the home. You'll learn first hand what is involved in caring for the house on a daily basis and what serious repairs may be required.
Making the Transition from Renter to Buyer
What does it mean to enter into a rent-to-own agreement? In most cases, entering into a rent-to-own agreement (often referred to as a lease purchase option) means that you have agreed to purchase the home in the future. There will usually be the standard move-in expenses such as a security deposit. A rent-to-own option means that you have the right to purchase your home within a certain amount of time at a previously agreed upon price. Many purchase-option homes also require an additional deposit that is due at signing. You can think of this cost as a kind of rental deposit. In most cases, an additional monthly payment will be made that is applied towards the purchase price of the home.
Know the Specific Responsibilities of Your Rent-to-Own Contract
There are certain responsibilities that come with entering into a lease purchase option agreement. Make certain that you are fully aware of all the conditions and terms of this agreement. In some cases, entering into such an agreement compels you to follow through on the purchase option. You must make all of your monthly payments in a timely manner. Not doing so may mean that you forfeit the right to purchase the home, and you may also lose any additional money that you have paid during the rental period. At the end of the lease, you will own the home you may not have been able to have had you tried to purchase it the year before. It is even possible that you may decide that this isn't the home for you and move on to something else.
Either way, this can be a positive experience.
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