What is the rent-to-own program?
This is a program designed to help renters fulfill their dream of owning their own home. Some people don't have enough down payment at the time when they find their dream home. Some people have enough down payment, but not good enough credit to secure a mortgage. Some people are self-employed, which makes a traditional lending a great difficulty. If you fall in one of these categories, this program is for you.
Instead of putting 20% down payment as most traditional good loan programs require, you may need only 3-5% down. You start out as a tenant, paying a little more than the market rental price, with the intention of purchasing the property within a specified time frame, usually two years. Such a program is better termed as "Lease Option", as you are buying the option of purchasing the property in the future. The 3%-5% down payment is then called the option consideration (OC) fee. The future purchase price is negotiated at the time of signing the lease option agreement, usually at some discount of the projected future price.
Within this rental period, you establish and improve your credit by paying your bills on time. The record of you being able to pay above-market-rent for two years also helps you to "season" your future mortgage.
Within the lease period, whenever you are ready to exercise your option to purchase the house, you may choose so. Often you can find lenders who will treat your loan application as a re-financing due to your excellent rent payment history. When exercising your purchase option, you may apply your initial OC fee toward the purchase price. Additionally, there may be a portion of your monthly rent that you may apply to the purchase price. Therefore, by the time you are ready to exercise your purchase option, you may have saved quite a lot of equity, from the OC fee, from some part of the monthly rent payment, and from the appreciation of the property itself! The higher OC you can pay and the higher rent you can pay, the more this program is forcing you and disciplining you to save for making your dream come true in the near future!
If you fail to exercise your option of purchasing the property within the specified time frame, you will lose your OC fee and the credit from the monthly rent. They are NOT refundable. This program is designed for home buyers. If all you want is to rent, this is not for you. We want to help renters successful. We want our clients to be happy and yet realistic. Your success and praise of our company is worth of thousands of words from ourselves.
Different firms run lease option programs differently. Even within the same company, different properties may be offered different lease option programs as well. It also depends on the seller, the buyer, and the property.
If you think this program is for you, or if you are just looking for your dream home, please enter your information at I am a Buyer.