Rent-to-own homes offer the renter an option to purchase the home toward the end of the lease period at a fixed price, states Les Christie for CNN Money. For this, the renter makes a down payment and pays a higher rent that is deducted from the final price.
Rent-to-own offers are available when sellers want to complete the transaction but buyers are unable to come up with the required funds mainly because they do not qualify for mortgages, says Steve McLinden for Bankrate. These transactions can be beneficial if the price of property goes up during the lease period and if the buyer is able to obtain the mortgage from a lender by the end of the lease period. Otherwise, the buyer forfeits the down payment and the additional payments he already made, warns Gary Foreman for Fox Business.
Rent-to-own can be a great idea if the buyer wants to live in the home and locality before making the final decision. However, he needs to enter into the transaction in the same manner he would an outright purchase, that is, after getting the property appraised, talking with the lender and ensuring he qualifies for a mortgage and checking, he will be able to make the mortgage and other payments on schedule, says Foreman.