Usually, when regular home buying is done, the sale is made shortly after an offer is received and the transaction completed at closing. The fact that many buyers don’t have the money to pay for cash, they take a mortgage is used to finance the purchase. Usually, the buyer will make a down payment and then pay the bank equal monthly installments.
It is, however, is difficult for one to qualify for a mortgage if they have a poor credit score. 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.
The Elements of a Rent-To-Own Contract
The Purchase Cost
The contract specifies when the buying price of the home will be determined. In some cases, the seller, and the buyer agree on the buying price when the contract is signed and will often be at or higher the current market value. In other situations, they agree to determine the price when the lease expires, based on market value future point in time.
Rent: During the lease period, the potential buyer pays the seller a specified amount of rent every month. The lease period is negotiable, but in most cases, it ranges between one 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. 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. 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.
Be sure to have the maintenance and repair requirements specified in the contract. Maintaining the property like lawn mowing, leaves raking and cleaning the gutters is different from replacing a damaged roof.
Purchasing the Property
A the rent-to-own agreement is an ideal option for people who want but are not 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.
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.