Rent-To-Own Homes-How It Works
Usually, when regular home buying is done, the sale is made shortly after an offer is received and the transaction completed at closing. In most cases, the buyers do not have the money to pay in cash hence they result into applying for a mortgage to finance the purchase. Usually, the buyer will make a down payment and then pay the bank equal monthly installments.
To qualify for a mortgage, however, the buyer has to have a good credit score and have money for down payment. Without a good credit score to qualify for a mortgage, buyers may not succeed in buying a home using the traditional method. 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. This type of agreement allows the buyer to the rent he home for a particular duration of-of time before they can think the option of buying the property when or before the lease expires.
The Elements of a Rent-To-Own Contract
The Purchase Cost
The the contract shows time and the manner in which the buying price of the house will be determined. In other cases, the buyer and the seller agree on a buying price once the contract is signed and this is often at or higher than the current market value. Other times, they will decide to determine the price once the contract has expired based on the market value 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 in most cases, it ranges between one and three years. In many agreements, a portion of each monthly rent payment is applied to the purchase price.
Maintenance: Depending on the contract terms, the potential buyer may be held responsible for maintaining the home and paying for any repairs, homeowners’ association fee, property taxes, and insurance. The fact that the seller is ultimately responsible for the taxes, association fees, and insurance, the seller may choose to take care of these costs. It, however, is still important for the buyer to have a renter’s insurance cover to take care of any loss of personal property or in case they accidentally hurt anyone in their premises.
It is important to make sure that the maintenance and repair requirements are specified in the contract. Normal maintenance and repair requirements like mowing, cleaning the gutters and raking leaves is quite a different form replacing damaged roofs.
The rent-to-own contract can be a good option for people who want but are not financially ready to become homeowners. The rent-to-own deal gives them the chance to straighten their finances for a while as they lock in the house they like to own.
To make the rent-to-own work, the potential buyers need to be confident that they will be ready to buy the house when the lease term expires.
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