Rent to Own House Laws
It's difficult today to purchase a home if you have bad credit. Mortgage lenders and banks rely heavily on your three-digit credit, or FICO, score when determining the history of paying bills on time. If scores are low, most traditional lenders won't lend mortgage money. There is an alternative, however; enter into a rent-to-own arrangement. Under such a deal, the rent is paid to the owner of a house while also holding an option to purchase that house at an agreed-upon date in the future. It's one way for consumers saddled with low credit scores to have the chance to purchase a home.
Other People Are Reading
-
The Option
-
For the most part, rent-to-own arrangements must meet the same legal requirements of any traditional lease arrangement. That's because they operate much like a standard rental lease. The renters agree to pay monthly rent to the owner of the house. They also put down a deposit to hold an option to buy the house outright at a future date.
The home's current owner and the tenants must agree on two matters: They must set a date for the leasing arrangement to come to an end. When this date arrives, the renters must exercise their option to purchase, request instead to continue renting or walk away from the property.
Secondly, renters and the property's owner must agree to a set price at which the renters will be able to purchase. This price can't change once the renters and the property owner sign the leasing arrangement that spells it out.
Largely Unregulated Field
-
Federal laws overseeing rent-to-own arrangements do not exist. This can be a problem, according to a story in January of 2009 by Minnesota Public Radio. The story said lawmakers in Minnesota were attempting to draft laws that would govern rent-to-own arrangements. That can be a slow process, though.
As legal experts in the story stated, it is up to renters to ensure that they sign a lease contract that spells out important protections for them.
-
Protecting Assets
-
The responsibilities of landlords and tenants in rent-to-own situations can be murky unless they are spelled out clearly in the rental contract that both parties sign. For instance, renters should make sure that the contract states that the property owner is responsible for fixing problems such as leaking plumbing, furnaces that won't turn on and air conditioners that shut down in the middle of summer.
Tenants need to remember that just because they want to one day buy the home doesn't mean that are no longer renters. As renters, they should not be responsible for making, or paying for, repairs to the home itself.
-
References
- Photo Credit house image by Earl Robbins from Fotolia.com
