With a lease-option or rent to own contract, you may be able to move into the new home of your choice right away, even if it will be months or years before you will be in a position to purchase it.
A lease-option is a bit of a hybrid – part purchase agreement and part rental agreement. With a lease-option, you and the seller decide on a purchase price for the home, and a time period (usually in the range of one to five years, with three years being common) during which you’ll have the option of purchasing the property at that price. The typical contract for renting to own a home includes the following terms and obligations:
In a rent-to-own contract, you pay a fee now in exchange for having the option to buy a property later. Although 1 percent is typical, it can be more or less. Generally if you choose to exercise your option and purchase the home, this fee counts toward your down payment, whereas if you do not exercise your option, the fee is not refunded to you.
During the period between the start of your contract and the time you either exercise your option to buy or your option expires, in effect you are a renter. As a renter, you pay the owner in exchange for being allowed to occupy the property.
With most lease options, a certain percentage of the rent you pay each month, perhaps 10 percent, is credited toward your down payment should you choose to exercise your option to buy.
Often a lease option places certain obligations on the renter to maintain the property. Your contract will spell out the details of what is required of you.
Contact a real estate agent for complete answers to all of your real estate questions.