The complex world of real estate can actually be rather simple when it comes to becoming a new homeowner. Although this process can be simple, purchasing a home is not for everyone. Some potential home buyers need to find creative ways to purchase a home, such as contract sales and rent-to-own agreements. Understanding the differences between these options is necessary if you are looking for a way to buy a home that fits your unique needs. Below you will learn more about the purchase process, monthly payments, possession, and benefits of these two different purchase options.
If you are in a contract sale, your monthly payment will consist mainly of principal and a small amounts of interest. The interest is first agreed upon by the buyer and seller. With a rent-to-own option, the monthly payments will be distributed in a way that favors the seller. Most of the payment will go to the seller as rent. A small portion of the payment in a rent-to-own agreement will go toward the buyer’s down payment for the later purchase of the home.
In a contract sale, your purchase price will be determined upfront. When the agreement has come to an end, the home is purchased from the seller in one large sum. This payment is the purchase price minus the principal that you have been paying each month.
In a rent-to-own agreement, you have the option to purchase the home at the end of your agreement with the seller. You can obtain a mortgage to pay the seller for the settled price. After your rent-to-own agreement ends, you will pay the price of the home minus the down payment that you built up through monthly rent.
Possession Of The House Title
Once a buyer enters a contact sale, they take full possession of the home. The buyer receives an equitable title, which means that the actual title to the home will be given when the agreement ends. With a rent-to-own agreement, the seller maintains possession of all titles until the end of the rental agreement.
Benefits Of Alternative Home Buying Options
There are several benefits to both contract sales and rent-to-own agreements. If you do not want to mess with the process of getting a mortgage, a contract sale could benefit you. Everything is financed by the seller in a contract sale, so you would not have to endure background checks and pay certain extra fees.
If you have little to no cash for a down payment, a rent-to-own situation may suit you. A rent-to-own agreement will give you time to build a down payment through monthly rent, so it is a popular option for many first time buyers.
Lease With Purchase Option
Although the above methods for homebuying are good alternatives for some, another great way to buy a home is through a lease with purchase option agreement. This type of agreement helps those who have difficulty affording a home and those who aren’t quite certain that they would like to buy.
A lease with purchase option agreement works in the same manner as other lease options, with some differences. The purchase price is decided upon during the creation of lease. A tenant can pay an option fee, which reduces monthly rent, or forgo the fee and get a credit towards the total purchase price.
Guidelines and specific sections of the agreement, like the credit amount and lease term, vary depending upon what firm you are purchasing from. Be sure to understand all aspects of your lease with purchase option agreement before making a decision.
Lease With Purchase Option Homes With IPS Amarillo
IPS Amarillo offers homes through a lease with purchase option. This type of lease is perfect for people that aren’t sure about buying a home, but also don’t like spending money on rent. If you choose to pay an option fee, it will reduce your monthly payment. If you don’t want to pay the option fee, you will get a monthly credit towards your home purchase. Learn more about our Lease Options today!
We have many Available Properties in Amarillo and the surrounding area. For more information about the homes we offer, give us a call at (806) 220-6816 or Contact Us by email. You can also visit us in person at 5701 Time Square Blvd. #340 in Amarillo, Texas to learn more about how we can help you.