Home Dreams, llc frequently asked questions

Rent-to-own/option purchase is when a tenant buyer signs a real estate purchase option agreement that gives them the right to purchase the home within a 2-year period. A minimum of 10% non-refundable down payment is required upon signing the agreement.  

Under a rent-to-own agreement, the monthly rent payment would include a portion of the monthly payment that will go towards the down payment for purchasing the home. The lease contract states the tenant's rental payment, how much of the rental payments accrue toward a down payment, and the purchase price of the home. 

Rent to own homes are those with leases that include either an option to buy or a requirement to buy after a certain period of time. The rental payments include both rent and funds that contribute to a future down payment. It can help you build up your credit score and save for a down payment on the property all at once. 

 Lease-purchase This option obligates you to buy it, and you could have legal liability and/or lose the premium you paid toward a down payment if you don’t buy the home when the lease expires.  

 Pros 

1. You won’t have to move twice. The obvious benefit of rent-to-own options is that your housing plans are in place all at once. This works if you don't want or need to move. 

2. You could build a credit history while renting. Rent-to-own could be a good option for people who might have recent credit trouble that they need a few years to repair. Your credit score plays a big factor in the mortgage rate you'll get, which can make a big difference in your monthly payments. Your credit score also helps determine whether you're eligible for a mortgage.

3. You can budget for future payments. Knowing how much you’ll be paying for your home in the future could make it easier to plan financially.

Cons

1. You could be on the hook for repairs and maintenance. Because you’re paying a premium on top of your rent to buy the home later, make sure you understand what you’re getting for that premium before you sign anything. Some contracts may require you to maintain the property and pay for repairs — obligations that usually fall to the landlord when you’re renting.

2. You’ll have to treat the rental as a purchase, even if you opt not to eventually buy it. You’ll want to have the property inspected just as if you were buying it today to make sure there are no major problems that will cost you down the road. This would usually require an independent appraisal to make sure the home is worth what you’ve agreed to pay. You also want to be sure the owners are current on property taxes, so you won’t get stuck with that bill later.

3. Your choice of homes is limited. Most homes for sale are not rent-to-own, so you’ll be shopping from a smaller pool of homes that fit that bill. And if you need to move before buying, you could lose your down payment.