A lease option is a type of arrangement where you get to buy a home at a future date after you spend a set period of time leasing it. The price of the property will be set at the time you sign the agreement for the lease option.
These are great options during slow real estate markets. They are beneficial for buyers who have little or no credit to show on paper aside from a prior rental history.
The cost of a lease in a lease option could be higher than an ordinary rental. This is because the agreement sometimes specifies that a higher sum is paid each month so that a set amount can be applied to the future down payment.
Where To Find Rent To Own Homes
Probably the biggest question most people have about rent to own properties is where to find them and how to negotiate them. While we can’t get into all of the details in this post, we do think there are some great options for you.
Check out the following for some popular Mid-Atlantic cities:
- HomeownersGuides.org – Richmond, VA
- HomeownersGuides.org – Greensboro, NC
- Redfin.com – Washington DC
- Trulia.com – Baltimor, MD
Risks of Lease Option Agreements
If you do enter a lease option, you could run into the problem of being unable to qualify for a home loan at the time you can exercise your option to buy it. This could be the case if you do not have an option agreement that allows you to save money from excess lease payments that can go toward a down payment.
If you cannot qualify for a loan at the time the option comes due, you forfeit any money you have put towards the purchase.
Benefits of Lease Option Agreements
For sellers, they can find a qualified buyer depending on how they screen their tenants before entering into the option agreement. They can also avoid the risks that accompany the property if it were to sit on the market vacant.
For renters, if you can set a reasonable option fee which might be up to 5 percent of the purchase price, you could end up with a home you love that you have already put a significant amount of money towards the ownership of. You can have a better chance of qualifying for a mortgage, too, if you check with a broker before you enter into a lease option.
Be sure that you understand that once you do own the home you have to pay not just for the mortgage but also for taxes, insurance and repairs. These are expenses most former renters are not accustomed to being responsible fo. As long as you can plan ahead for these added expenses, you can easily make your dream of owning a home come true with a lease option.