If you have limited or bad credit, but would like to purchase a new home, there is a way for you to accomplish this through a rent-to-own option. This option allows a seller to act as a landlord for the property while they receive steady “rent” payments from you. The landlord (seller) remains the legal owner of the property during the payment terms. A portion of the amount you submit to them for rent will go against a balance agreed upon to purchase the property. The other portion is the rent you would pay for living on the property.
Rent-To-Own Purchase Agreement
If you enter into a rent-to-own agreement and it is properly signed, it becomes a legally binding document as long as it does not violate existing federal or state laws. Rent-to-own agreements are sometimes called, lease-to-own or lease options and typically involve a single-family home. In these arrangements there are two agreements made up; a standard lease agreement and the option to purchase agreement. The agreement remains identical to a regular lease agreement including how long the period will run, the amount of rent to be paid and the maintenance responsibilities.
The option to purchase agreement gives you the option or right to buy the property within a specific time frame in exchange for a fee. This fee is normally paid up front or in the form of higher-than-market rent where some of the money is applied towards the purchase of the property. If you decide not to purchase the property, the landlord will not be required to refund any of the option fees. There are many terms and conditions in place for these agreements as there is a lot at stake for both tenant and landlord (buyer and seller).
Payment Arrangements For A Rent-To-Own Agreement
The payments or rent is divided into two sections. The option fee is the part of your rent that will go toward the purchase of the property. The remaining amount referred to as the rent premium is the amount you pay as rent for living on the property. The money you pay as part of the option fee is not refundable if your situation changes and you decide not to purchase the house.
Maintenance Responsibilities In A Rent-To-Own Agreement
Maintenance terms are something you will have to agree to with the seller. If it is decided that you will be responsible for maintenance costs, these also are not refundable should the sale not go through. Unless you recklessly caused damage to the property, the seller is not entitled to any repair costs made if the sale does not go through as scheduled.
Rent-To-Own Agreement Benefits To The Tenant
A rent-to-own agreement can be a great way for you to purchase a home. This is especially true if you have experienced a lack of credit, bad credit, or do not have a down payment to qualify for a regular mortgage. A rent-to-own agreement will allow you to invest and build equity in a house while still having the option to walk away. You will be out any money you have paid towards the property. However, this rent-to-own agreement will not impact your credit history or result in foreclosure proceedings.
Rent-To-Own Agreement Pros And Cons For The Landlord
During the time of the agreement, the landlord can enjoy a long and reliable tenant and in most cases does not have to worry about maintenance. The landlord will also retain all fees if the tenant decides to back out of the rent-to-own agreement.
Rent-to-own agreements have a downside for sellers as they are unilateral agreements. The landlord is obligated to sell the property by contract whereas the buyer or tenant is not contractually obligated to purchase the property.
Not Interested In A Rent-To-Own Home? There Is Another Option…
IPS Amarillo offers homes through a lease with purchase option. This type of lease is perfect for people that don’t want to lose all their investments to rent, yet are not quite ready to commit to a mortgage. 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 via email. You can also visit us in person at 5701 Time Square Blvd. #340 in Amarillo, Texas.