Find Rent to Own Homes

How do Rent to Own Homes work
Rent to own, rent to own homes or lease to own – it doesn't matter how you say it, the same principle applies in all instances. House hunters today want the best of both worlds, feeling out homes in specific neighborhoods without committing 100 percent to buying them. The benefits of a "rent to own" home are enormous.
Think about it, what if you were able to pick an area that you would like to live in but may not be able to afford right now or just no ready to make that big purchase. With the Rent to Own process, you can get into that house without the 30 year commitment. You can even have a portion of the rent credited to the sales price or closing costs, that’s instance equity at closing for you.
Just remember, you will need to get the seller to agree on not only the rent to own agreement, but the terms of the agreement. i. e., length of the agreement, usually, one to two years; the percentage of the rent which gets applied to the sales price or closing costs, etc. If you get lucky, the seller may also be interested in doing Seller Financing with you. Just be sure to have a lawyer review any agreement before you sign it. A little legal cost upfront could save you thousands of dollars down the road.

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Rent To Own - Basic questions

SPECIAL NOTE:

Foreclosure.com has a few thousand VALID Rent-To-Own listings, where the owner is willing to enter into a Rent-To-Own contract with a potential buyer. These VALID listings are listed below and the property description usually denotes the Rent-To-Own or Lease-To-Own option. But, when looking at pre-foreclosure and foreclosure listings for possible Rent-To-Owns, do understand that you cannot do a Rent-To-Own contract with the current owner that is in the foreclosure process. You will need to find an investor that is willing to do an approved Short Sale on the pre-foreclosure or purchase the foreclosure from the bank and enter into a Rent-To-Own agreement with you.

Click on a state below to begin searching for Rent to Own in your area.

Rent To Own Steps

  1. Determine if rent-to-own is right for you
    (See above)
  2. 1.

    Find a rent-to-own home

    Search the best rent-to-own homes near me on Foreclosure.com using our comprehensive database and find your ideal rent-to-own home today!
  3. 2.

    Get a home inspection

    It’s normally not necessary to commission a home inspection on a traditional home rental, but remember that rent-to-own is not a traditional home rental. This is a short- and long-term investment that requires the utmost attention to detail. And the small upfront cost of a home inspection could save you literally thousands down the road. Therefore, hire an independent home inspection professional to uncover any problems the house may potentially have. It’s important to do this even if the current homeowner furnishes a disclosure statement that attests to the condition of the home. If the independent home inspector points out problems, it’s important to determine whether or not the issues will prevent you from getting a future home loan once the rent-to-own term ends. Therefore, make sure the contract specifies who is responsible for making the necessary repairs discovered during the inspection prior to finalizing the rent-to-own agreement. The homeowner might offer a credit off the final purchase price at the end of the rent-to-own in lieu of payment for damages. Either way, be sure to get everything in writing before finalizing a rent-to-own contract.
  4. 3.

    Negotiate fair terms

    It’s critical to sign an agreement that is in your best short- and long-term interests. The rent-to-own option will cost more than a traditional home rental because there are other costs baked into the monthly amount. The good news is these “other costs” such as the initial option fee and monthly credit will go toward the final purchase price. Nevertheless, a rent-to-own contract should always include the length of the rent-to-own lease agreement (usually anywhere from 12­ to 70 months), the amount of initial option fee (usually 35 percent of final purchase price), the final purchase price at the end of the term, and the amount of the monthly payments that will go toward the purchase price. These figures are all negotiable.
  5. 4.

    Review the contract

    It is highly recommended that you hire a real estate attorney to review the rent-to-own agreement. In addition, be sure to contact a home insurance agent to determine the coverage that you will need. Indeed, now that you have an interest and will be invested in the home, you may require additional insurance to protect it.
  6. 5.

    Execute the contract

    Once you fully understand all the terms of the rent-to-own agreement -- and have had an attorney look it over and provide feedback -- it’s time to finalize the deal. Of course, signatures from both parties will be required at this time, as well as upfront payments such as the agreed-upon “option fee,” the monetary consideration that is necessary to make the rent-to-own contract binding.
  7. 6.

    Make monthly payments

    Rent-to-own homes will typically cost a bit more than the fair market value of other home rentals in the area. That’s because a portion of the monthly rent-to-own payment will be designated as a “rent credit” -- up to 20 percent of the monthly amount due -- will go toward the purchase of the home when the agreed-upon term expires. It’s important to make these monthly rent-to-own payments on time and as scheduled.
  8. 7.

    Start planning (for end of contract)

    As the end of the rent-to-own contract nears, it’s a smart idea to address any minor problems that the home inspection turned up. It’s also a good idea to make small cosmetic improvements and upgrades as needed, if possible, to help increase the value of the home prior to applying for a mortgage loan. It’s called sweat equity … and it can make a big difference when it’s time to negotiate favorable mortgage loan terms.
  9. 8.

    Apply for a mortgage (at end of contract)

    Part of planning for the end of a rent-to-own contract is identifying a mortgage company that can help you finance the balance of the home loan. The mortgage company will:
    1. Run your credit
    2. Verify your employment
    3. Verify your income
    4. Verify your debt-to-income ratios
    This will ensure that you are not getting into a contract to purchase a home that you can’t afford. It’s important to give yourself a decent head start on the mortgage loan application process to see where you stand, as well as give yourself time to repair and/or fix any credit-related issues that might prevent you from obtaining a home loan. That’s because you need to be ready with an approved mortgage loan on the date specified in the rent-to-own contract.
  10. 9.

    Close on your new home!

    Once you have satisfied the terms of your rent-to-own contract, made improvements to the property, lined up your home loan financing and closed on your rent-to-own home, the last thing you need to do is celebrate — You are now a proud, new homeowner. Congratulations!
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