How The Rent-To-Own Home Process Works

Rent-to-own homes are considered an alternative for individuals who may not have the best credit score or the right amount of cash for a down payment. The basic outline of a rent-to-own contract is that the buyer would actually sign an agreement that would allow them a specific timeframe in which they would “rent” a home through a lease. Before or when the lease is set to expire, the buyer is then given the option to buy the property completely.

The Contract

Getting into more details of the contract will help you to understand why this is an option that many are seeking when it comes to ultimately buying a home. Just as you would do when renting an apartment, the buyer can immediately move in after signing the contract. During the time that the lease is in place, the buyer can work on saving money for a down payment and also make improvements on their credit score.

Though moving in is considered the easy part of the process, you must read the fine print when it comes to this type of contract. There may be contingencies in place that you must follow through with while staying at a specific property. Just like with buying a home straight out, each person’s situation will be different and should be treated as such. The length of some contracts could be only a year while there may be others that could sign a contract for a duration of three years. Your unique situation may cause for more or less time than this.

Option Consideration/Money

n the agreement between the buyer and seller, the buyer will pay a fee, that is one-time, to the seller. This is what gives the buyer the option to buy the property before or after the lease has run out. A buyer is not always obligated to buy the property at the end of the lease though. This is where you have to be very careful with a contract.

If you are not completely sure about actually buying a home that you plan on doing a rent-to-own contract with, then you need to make sure have specific wording in the contract. Always make sure that when you see the words “lease purchase”, that the word “option” is a part of that. When including this one word, it allows you to be free of the obligation to purchase the property later on. On the other hand, if this word is left out, then you may be required to purchase the property once the lease has run out. If you are not completely sure of your contract and what it entails, do not be ashamed to let a professional real estate lawyer take a look to make sure you are not under any obligations that you have not agreed to.

Another point to remember about option money is that your rate can vary depending on you and your situation. Sometimes the rate can be as low as 2% or as high as 7% or more. And there are even some contracts that allow for this portion of the money you pay to be applied to the closing costs if you decide to buy the home.


If you choose the option of wanting to purchase the home after your lease is up, then in your contract will be a defined amount for the purchase price. Another option could be that you and the seller both agree to make a determination of the price once your lease is up. For most however, choosing to go ahead and decide on a price and have that price legally binding in a contract is a much better deal than waiting to do it later when prices could be higher than ever.

During this step, the rent is also determined and can differ depending on your unique situation. Rent payments are often made each month, but some sellers may choose every 3 or 6 months.

Property Upkeep

In most cases, the buyer is going to be responsible for paying any property taxes, insurance, repairs, or fees that are associated with the property. However, there are some cases where the seller may be willing to take on some of these expenses. It is best to be prepared to take responsibility for them ahead of time so that you are prepared when it comes time to sign the contract.
These are the basics of most rent-to-own home contracts and the process that you will have to go through to obtain this type of housing. It is important that you plan ahead and be prepared, despite this being an easier option for those who want to be homeowners.

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