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.
It is, however, is difficult for one to qualify for a mortgage if they have a poor credit score. 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. The the rent-to-own contract allows the buyer to rent the home for a specific period before they can have the option of buying the property when or before the lease 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 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 term of the lease, the prospective buyer pays the seller a specified amount of rent, usually on a monthly basis. 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.
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 seller is overall responsible for the association fees taxes and insurance, he may decide to cover those expenses. 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.
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.
Buying the Property
The rent-to-own contract can be a good option for people who want but are not financially ready to become homeowners. It allows them the chance to get their finances in order while locking in the house they’d 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.