Rent to own homes: When it’s not time to buy

Rent To Own Homes

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Just a few years ago, you hardly ever heard the term “rent to own” in a market where homeowners had multiple bids from which to choose. But now, it’s a different ballgame. Homeowners may be more willing to work out rent-to-own agreements, even with people who would be turned down for home loans.

A rent-to-own contract requires prospective buyers to pay monthly rent to the homeowner, with a portion of it going toward a home purchase at a later date. This contract usually lasts two to five years at which time both parties start the standard home purchase, said Rich Arzaga, a financial planner in San Ramon, California, who has taught commercial real estate investment at University of California, Santa Cruz.

“If you’ve had your house on the market for a while, this transaction could let you move while having someone in your house generating cash flow for your mortgage,” said Ron Phipps, past president of the Washington D.C.-based National Association of Realtors.

For wishful homebuyers with checkered credit histories, it’s a homebuying option worth considering, said Sam Tamkin, a real estate attorney in Chicago. “You may be unable to qualify for a loan right now, but there are sellers who may be willing to consider renting to you with an option to purchase later.”

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