When you have financial problems that could prevent you from qualifying for a home loan, there is still a chance that you could become a homeowner. If you can find a seller willing to setup a rent-to-own contract with you, you could eventually own a home. Whether or not this is the best way to become a homeowner is debatable though. If you are considering a rent-to-own situation, here are some pros and cons to help you decide.
What Are the Benefits of Rent-to-Own?
The most obvious benefit to entering a rent-to-own contract is that it enables you to become a homeowner even if you do not have financing. The seller will typically require a low down payment and then an additional amount on top of the rent each month.
For instance, the seller could require a $5,000 downpayment and ask for an additional $200 a month on top of the rent payment of $800. The additional $200 will be the funds that are applied to paying off the home.
Another reason to consider a rent-to-own contract is that you have flexibility that other homebuyers do not. If you want to move out of the home, you do not have to buy the home. You can simply opt out of the contract and continue to rent or move.
In addition to these benefits, opting for rent-to-own gives you and your family time to save money for the future. Your savings can be used to pay down debts and improve your credit. You could even use the savings for a downpayment down the road.
What Are the Disadvantages of Rent-to-Own?
Although there are benefits to rent-to-own, there are some drawbacks. For instance, there is no guarantee that you will own the home at the end of the agreed upon terms. If your contract with the seller is not legally sound, the seller could take advantage and deny you the right to take ownership of the home.
The situation is avoidable though. Before signing an agreement with the seller, have your real estate lawyer review it. He or she can ensure that your interests are protected and that at the end of the contract, you are the owner of the home, if desired. He or she can also ensure the right contingencies are in place.
Another drawback to consider is that you could potentially lose money. If you do not buy the home, the money you put towards buying it is typically non-refundable.
Before entering a rent-to-own contract, discuss it with services like Garcia, Kinsey, Scott & Villarreal, P.L.C.Share