Rent-to-Own Option For Homebuyers

Even if you don’t qualify for a home loan under the current lending regulations, renting may not be your only option. An alternative such as rent-to-own makes homeownership possible for those who may not meet underwriting standards. These transactions have some variations depending on state rules and the contents of the legal agreement, but a rent-to-own (or lease-purchase) transaction often means the buyer rents from the owner for a set period of time, after which the buyer agrees to purchase the property. In some cases, the tenant might pay extra money each month toward equity in the home.

A lease-option agreement gives the lessee the option (and not the obligation as with lease-purchase) to later buy the property. “It could be a house in a neighborhood that you really want to settle in but for whatever reason you can’t qualify to buy a home,” says Barry Zigas, director of housing policy at the Consumer Federation of America. “Instead, you can qualify to rent one that you’d like to be able to buy in the future.” Zigas says rent-to-own especially appeals to former homeowners who want to get back into ownership.

Source: AOL Real Estate