Avoiding Rent to Own Pitfalls
- Talk to a mortgage broker before closing.
- Make sure you can raise your credit score by the time you’re ready to buy.
- Get a home inspection done.
- Make sure you can afford repairs.
- Do your research.
- Know your contract.
- Get everything in writing.
- Put your money in an escrow account.
Is it a good idea to do rent to own?
A rent-to-own agreement can be an excellent option if you’re an aspiring homeowner but aren’t quite ready, financially speaking. These agreements give you the chance to get your finances in order, improve your credit score, and save money for a down payment while “locking in” the house you’d like to own.
Why rent to own is bad?
Rent-to-own programs do not require credit and are not a form of credit, so they are excluded from regulation by federal law. While some states do effectively regulate the purchase agreements, there are other states that have no regulations at all, which means that the buyer is taking on all the risk.
What’s the catch with rent to own homes?
Let’s face it — landlords aren’t going to credit a portion of your monthly rent toward the purchase of the house out of the goodness of their hearts. They’ll expect something in return. This “catch” is usually more per month in rent than you’d pay in a simple rental arrangement.
Who pays property taxes on rent to own?
The Seller is responsible for payment of taxes and insurance and HOA fees since they are the legal owner of the property. Hopefully the market rent that the Seller charges for the Lease is high enough that the sum of their mortgage payment, taxes, insurance, and HOA fees is covered by the rental amount.