How to Rent a House to Own

Rent to own house deals are gaining popularity once again. With a tight mortgage market and stricter lending standards, many buyers who can't qualify for conventional financing decide to rent a house to own instead. This deal can be a win-win situation, with benefits for both the renter/buyer and landlord/seller. Buyers lock in a good deal on a house and a portion of their monthly rent goes toward the future purchase of the house, so they don't feel as if they are throwing away their money each month. Landlords may appreciate rent a house to own deals because their tenants are more likely to pay on time and have an owner mentality, improving the premises and house. The renter-buyers are protected from rising real estate prices and landlords have the knowledge that the extra money is theirs to keep if the buyers back out of the deal.

Difficulty:

Moderate

Instructions

Rent a House to Own

1. 

   Find a house that meets your needs. While some houses are listed with a rent-to-own option, you can approach the agent or owner of any house listed for sale or for rent and find out if the owner is agreeable to a rent-to-own scenario. Look for a house that meets your criteria, most especially location, rather than settling for a house you don't love just because it is advertised as a rent a house to own deal.

2. Negotiate with the landlord/owner for terms that will be good for your situation. The option to buy clause should give you a reasonable amount of time to repair credit problems and qualify for conventional financing. Most option-to-buy time frames are about one to three years. The longer, the better, if you're the buyer.

3. Consult with a lawyer about the contract before signing. Ensure that your interests are protected and that you haven't overlooked anything. A good real estate lawyer will be able to spot clauses that might make the deal a bad one for you, or have ideas to better protect your interests in the contract.

4. Renegotiate the terms of the contract if further investigation or legal consultation inspire you to make changes. Realize that everything is negotiable -- the down payment, the extra monthly premium, the option to buy term.

5. Sign the rent to own agreement, and pay the initial down payments and deposits as stated in the contract. Usually, you will pay a 1 to 3 percent down payment at the signing of the contract, as well as your first month's payment and a security deposit.

6. Make your monthly payments on time, and work on repairing any credit problems you have. Pay all your accounts as agreed in order to fix your credit and qualify for a conventional loan.

Tips & Warnings

• Avoid late payments, which may jeopardized your contract.

• Realize that you will forfeit your deposit and extra payments if you break the contract.