Your Rent-to-Own Guide

It’s hard for people to buy a house the traditional way. It can be even more stressful considering the fact that rent can feel like throwing money into nothingness. Luckily, that doesn’t necessarily need to be the case. That’s because there are different ways to go about the home buying process. One way in particular is through the rent-to-own process. Rent-to-own housing can be a great opportunity for people who are looking to buy a home. 

Your Guide to Rent-to-Own Properties

Properties that are able to be bought through the rent-to-own process have a clause in the rental agreement that states the renter will either have the option to purchase the home or the requirement to purchase the home. The purchase can be done after a set timeframe. It’s important to note that every rent-to-own agreement is unique. However, generally you can expect a part of the rental payments to go towards the home purchase in one way or another. 

Benefits of a Rent-to-Own Property

This can be a great opportunity for people that:

  • Need more time getting together a down payment
  • Could use more time to improve their credit situation
  • Have a hard time with the traditional process of buying a home

Basically, anyone that needs some extra time to get their financial situation in the right spot before buying a home could benefit from this type of home buying approach. 

Understanding Rent-to-Own Fees

There are some fees that you can come across with this type of agreement. It is important to know about these fees because they should be kept in mind when considering this option. You could come across nonrefundable upfront fees. An example of this fee, also known as an option fee, requires the buyer to pay a fee that’s typically non-refundable. This fee is what provides the renter the option to buy the property in the future. While buyers have the ability to negotiate the option fee, it usually is between 1% to 5% of the purchase price of the property. 

What to Do Before Signing a Contract

Before entering this type of agreement there are some tips you should keep in mind. These tips can help you avoid getting into an agreement that isn’t right for your current situation. Some tips to consider include:

  • Use a Real Estate Attorney 
  • Have a Clear Understanding of the Agreement
  • Do Your Own Research 
  • Look into the Property and the Seller
  • Ask Questions

Steps of Getting a Rent-to-Own Home

It’s not as complicated as it may seem to get a rent-to-own property. There is some information you will want to be aware of when it comes to getting one of these properties:

  • Coming to an Agreement on the Purchase Price of the Property
  • Applying Rent Paid Towards the Principal Balance
  • Getting a Clear Understanding on How Maintenance will be Handled
  • Understanding What Happens Come Time to Buy the Property

Coming to an Agreement on the Purchase Price of the Property

When it comes to a rent-to-own contract, the renter should have a clear understanding on both how and when the purchase price of the home is determined. Since it varies by agreement, there are a bunch of different setups a renter could come across. However, renters can agree on a price at the time of the contract signing. Usually this price is higher than the current market value. Another type of set up would be that the price of the property is determined once the lease expires. It just depends!

Applying Rent Paid Towards the Principal Balance

During the rental period, the rent you paid can be handled a bit differently than a traditional setup. For example, let’s say that a renter pays $1,000 every month towards rent for 3 years. If 20% of that rent is put towards the home purchase, a renter would have put $7,200 towards the purchase. On top of that, a renter may be able to apply the option fee or at least a part of it toward the purchase price. 

Getting a Clear Understanding on How Maintenance will be Handled

When people think of a standard lease agreement, they picture the landlord being in charge of handling most home repairs. However, that’s not necessarily the case with rent-to-own properties. Renters may have this responsibility, especially considering that the goal is to own the property once the lease is done. Make sure to have a clear understanding of what maintenance expectations are set within the agreement. 

Understanding What Happens Come Time to Buy the Property

What a renter can expect to deal with come time to buy the property depends on the agreement that was set up. If the renter entered an agreement with the option to enter a mortgage then some financing would need to be set up to pay the seller what is due. If the renter doesn’t want to take advantage of the option to buy then they will need to move out like in a standard rental agreement. In this case, it’s not uncommon for the renter to forfeit any money paid until that point in time. 

On the other hand, if a renter entered an agreement that requires them to buy the property after the lease, they have the legal obligation to follow this. However, this can be a problem, especially if renters can’t get financing. If a renter doesn’t purchase the house like they said they would then it could lead to penalties. That is why the contracts where the renter has the option of buying versus the obligation are more popular. That flexibility can make a world of difference in the long-run. 


If you are someone that has a hard time getting a home through the traditional home buying process, you’re not alone. An alternative to consider is a rent-to-own property. These homes can be beneficial because they provide more time for the person interested in buying a home. Through getting more time, they can focus on saving for a down payment, improving their credit, or even just testing the home to see if it’s a good fit for their lifestyle. 

Every rent-to-own agreement is different. Some agreements require the renter to purchase the property after the lease is done. On the other hand, some agreements provide the renter the option to purchase but there is no requirement. You should consider rent-to-own homes if you are having a tough time securing financing through other means when it comes to getting a house!

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