The Perfect Solution to Home Ownership through Creative Financing Options
Due to today’s rising prices, most people are having a difficult time saving enough money to pursue their dreams of owning a home. One may think, “How does a young coupe save enough money to break into the housing market?” The solution is to think out of the box and come up with creative financing options. The lease-to-own or rent-to-own programs are said to be the perfect solution for couples or families to get into their dream houses through easy financing terms.
In the rent-to-own program, the landlord and the renter come up with an agreement allowing the renter to purchase the house within a specified period of time (normally 2-3 years) for a specific price. An option fee between 1% and 5% of the price is credited to the purchase price and a premium is added to the monthly rent payment in order to accumulate a deposit. However, if the renter will not pursue to purchase the house or backs out of the purchase agreement, he will lose both the option fee and the rent premium. Thus, it is important for renters to take the rent-to-own program seriously from the start to avoid any losses if they later decide not to buy the house.
Typical Rent-to-Own Contract Features
If you are planning to enter a rent-to-own program, it is important to know the things stated in your contract. The monthly rent and home price are usually established and documented based on market value. In addition, other negotiation between the buyer and seller are included in the contract. 
The rent-to-own contract will state an option period. This refers to the period where the borrower can build equity while living in the home. By the end of the option period, the borrower can apply for mortgage. When he successfully qualifies for a mortgage loan, he can then buy the house he used to live in during the rental period. It is important that the borrower has a good idea of his ability to assume a mortgage. It would help to talk to a lender before entering a rent-to-own agreement. In this way, his financial situation can be examined thoroughly. The borrower needs to improve his credit rating and this can be achieved by making on time payments for any loans or credit cards each month.
As for the price of the home, it is usually agreed upon at the start of the rental or option period. If the house price drops after the option period, the borrower may request a down payment based on the new market value of the house. But the price may also go up 3% in price and the seller is out the amount of the increase. It is mainly for this reason that most contracts are drawn up with no final price indicated, just specifying the house will be sold at a fair market value by the end of the option period.
Buyers should be careful as there are shady sellers out there who will create a contract with an easy escape clause, such as the right to evict a tenant with only a 3 day notice. So if you plan to get into the rent-to-own program, it is best to have your contract reviewed by a lawyer before entering into a binding agreement. After signing the contract, make sure to pay your rent timely during the rental period and do not give the seller any opportunity to back out of the agreement.
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