Usually, when regular home buying is done, the sale is made shortly after an offer is received and the transaction completed at closing. Since many buyers do not have the money for a cash purchase; they usually will turn to mortgages to get the financing. The buy makes a down payment then makes regular installments to the lender over a period until the balance is paid in full.
However, for one to qualify for a mortgage one must have a good credit score and cash for down payment. Without these in place, purchasing a home in the traditional way may not be an option. But you don’t need to worry if you are faced with such a situation as you have an alternative in rent-to-own agreement. In this kind of agreement, the buyer is allowed to rent the home for a set time before they can make whether they want to buy it before or when the lease period expires.
Features of The Rent-To-own Agreement
The Purchase Cost
The the agreement will specify when and how the buying price of the property will be determined. There are times when the seller and the potential buyer will agree on the purchase price after the agreement has been signed-often at or higher price than the current market value. In other cases, the buyer and seller agree to determine the price once the lease has expired and is usually based on the market value at that future point in time.
During the lease period, the potential buyer pays the seller a specified amount of rent each month. The lease period is negotiable but frequently ranges between bone and three years. In most contracts, a percentage of each monthly rent payment is applied to the buying price.
Depending on the terms of the agreement, the potential buyer may be responsible for maintaining the home and taking care of any repairs, homeowners association fees, property taxes and insurance. Since the seller is ultimately responsible for the association fees, insurance, and taxes; they may decide to cover the costs. Howevr, the buyer still needs to have a renter’s insurance policy to cover loss to personal property and provide liability coverage if someone gets injured while in the home.
Make sure that you have the maintenance and repair requirements are well spelled in the agreement. Normal maintenance and repair requirements like mowing, cleaning the gutters and raking leaves is quite a different form replacing damaged roofs.
A the rent-to-own agreement is an ideal option for people who want but are not ready to become homeowners. This type of agreement allows them to align their investments while securing the home they would like to own.
In order for the rent-to-own agreement to work, there is a need for the potential buyer to be sure that they will be buying the property once the lease period is over.