The homeownership rate in America has continued to grow to more than 65%. But for many people, owning their own home still seems out of reach.
With so many hoops to jump through and qualifications to meet, purchasing your own home can be impossible. Luckily, there is another option that just might be the right choice for you.
Rent to own allows you to use a portion of your monthly rent towards your down payment on the home. This option isn’t talked about much but is a great choice for many. We’ve compiled a list of the top five benefits of renting to own to help you see if it’d be right for you!
- More Forgiving Process
In order to secure a mortgage, borrowers have to meet set requirements from their lenders. This often includes a minimum credit score, a set amount of money in their accounts, and a saved down payment.
These requirements are set in place to help protect the lender from giving money that won’t be returned to them.
Unfortunately, a few wrong choices can completely change your ability to meet these requirements. And that can eliminate the possibility for you to get the mortgage you need to purchase a home.
The biggest rent to own benefits is that it favors those who don’t have a great financial situation at the moment.
When you’re renting to own you can work on building your credit by making smart financial decisions. Lenders can also look back at your history of paying your rent on the home and being financially responsible.
Renting to own gives you the opportunity to show your ability to handle a mortgage.
- Secures Purchase Possibility
Anyone can rent a place while they work on saving a down payment and improving their credit score. But the problem is that if you’ve found a place you love, it likely won’t be available once you’ve successfully met your goals.
When you rent to own it secures your opportunity to buy the property and home you’re interested in.
A part of the agreement made between the seller and the buyer is that the seller isn’t allowed to sell the home during the set timeline. The buyer has to have the opportunity to buy the home if they decide to do so after the rental period is over.
This guarantee can make the whole process much easier for the buyer. They can have confidence that the work they’re doing will pay off. It’s easier to stay motivated making responsible decisions when you know you won’t miss out on the home you really want.
The housing markets can be so unpredictable, which makes a little bit of security and even bigger benefits.
- Try-it On Option
One of the biggest benefits to renting to own is that you essentially get to try on a house before you purchase it. The seller is required to give you the option to buy but you’re not required to buy the home.
In no other option can you live in a home before you buy it. You get to know the odd quirks of the home that you only learn over time.
Every agreement is different but, generally, renting to own usually lasts at least a few years. That is plenty of time to see the quality of the home, if you like the area, and if the home will work for your family.
This type of agreement often means that the renter is in charge of more of the maintenance and regular bills that come with the home.
Most people don’t have a clear picture of the extra costs of owning a home before moving in, so this is a huge advantage to responsibly handling your budget.
- Set Price to Work Towards
Along with having a guarantee that the house won’t be sold without giving you an opportunity to buy, often times the price is guaranteed as well.
At the time the agreement is made the buyer and seller will agree on a set price for the house based on the current market trends and the value of the home. After that price is set the buyer can’t increase it, regardless of what the market does.
It’s obvious that this is often a huge blessing of rent to own. Markets often increase significantly over the course of a few years, so the buyer will be saving money if they can lock in the lower price.
If by chance, the market trends downward and the listing price of the home would be less at the time of purchase, the buyer has the option to negotiate as well.
In the world of real estate there is little guaranteed, so getting a set price is amazing!
- Gives the Seller Opportunity
Going with a rent to own setup isn’t only beneficial to the buyer, there are many perks for the seller as well.
The most obvious benefit is that the seller can make money on their property before they sell it. The rent price will cover their mortgage and there might be a little extra for them, depending on negotiations.
This setup is the most beneficial when the seller has been unable to sell the home in a traditional fashion but they need to move.
When they have a renter, they can have their mortgage covered meaning they won’t have to pay two full payments each month. It’s the best of both worlds and gives the seller a lot of needed freedom.
It’s best when financial situations benefit all parties so everyone is more motivated to work together, this is just that type of situation.
Top Benefits of Renting to Own
Owning your own home is a common goal for many people. Sometimes we have to go through unique processes to reach that goal.
One of the best benefits of renting to own is that the whole process can be customized to fit any family’s situation. You can work with the homeowner to come up with a solution that works best for everyone involved.
If you’re interested in learning more about unique financial solutions, check out our other articles today!