Rent-To-Own Homes: A Great Tool For Credit Repair

06-19-08

If bad credit is keeping you from being able to buy a home, you might want to consider the rent-to-own option. (You may have also heard this referred to as a lease with the option to buy.) This strategy enables you to repair your credit while gradually phasing into home ownership.

Here's how it works. First of all, the down payment is much smaller and more likely to be within your financial reach. Instead of the 20% usually required for traditional mortgages, the typical down payment for a rent-to-own home is only 2% of the purchase price.

Instead of buying the home outright, you sign an agreement with the seller to rent/lease the home for a period of time. During this time, you pay rent just like a regular tenant would. The difference is that instead of just paying rent, around half of your payment each month will be credited toward the eventual purchase of the home. Then as you make timely payments throughout the term of the lease, you will actually be repairing your credit while reducing the eventual amount you need to finance in order to purchase the home. (The typical lease period is around two years, but the length of the lease can sometimes be negotiated to even 3-4 years if you need that much time to regroup financially.)

At the end of the lease term, you have the option to either move forward on the purchase of the home you have been renting or walk away and find another home. If you decide to purchase the home, the rent credit you have built up will be applied to the purchase price that was set at the beginning of the lease. (Even if the value of the home has increased during the lease period, the seller cannot charge you more for the home than you originally agreed to.) If you decide to purchase a different home for some reason (you found something else you like at a better price, for example), you will forfeit all of the rent credit money you have accumulated (to compensate the seller for having the house off of the market for the leasing term), but you will be able to walk away without further obligation.

Obviously, the best way to purchase a home is by going the traditional mortgage route. The rents for rent-to-own homes do tend to be high. But if you currently have bad credit and can't get approved for a home loan, a rent-to-own arrangement may be your next best option. At least you will be getting something in return for your rent payments, unlike paying apartment rent. It really can be a great way to improve your financial stability and put you well on the way to home ownership at the same time!

Mark E. Moebius
CEO of MILJONAIR Development
3451 St. Albans Road
St. Albans MO 63073

636-300-9000

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