Rent to own a house is also called lease to own house (or several other terms like “lease option”, “lease purchase”, etc.).
So how does rent to own homes work in Houston and surrounding areas of TX?
How Does Rent To Own Homes Work?: The Agreement W
It’s quite comparable to leasing a vehicle.
In this arrangement, you rent a property from the homeowner and pay monthly fees for living there. After a specified period, typically around three years, you have the option to buy the house at a predetermined price that both parties agreed upon when signing the initial rent to own agreement.
Traditionally, a portion of your monthly rent payment might go toward the future down payment, depending on local regulations. However, applying rent toward purchase price is sometimes prohibited due to federal legislation known as the Dodd Frank Law.
Understanding Rent To Own Contracts In Houston
The agreement between buyer and seller must be crystal clear. Before signing anything, make sure you fully understand all terms and conditions. Don’t hesitate to ask the seller questions about anything that seems unclear or confusing.
This arrangement offers advantages for both parties involved, along with some significant benefits. Take time to understand both the advantages and potential drawbacks so you can make the best decision for your family’s future.
Key Financial Components Of Rent To Own Agreements
Initially, the property owner establishes both the purchase price and monthly rental amount for the home.
The Monthly Rent
The purchase price typically reflects the current market value of the home. Monthly rent payments in a rent to own/lease option agreement are usually somewhat higher than standard rental rates for similar properties.
Why?
Because you’re paying for the exclusive right to purchase that specific property when the agreement ends. You’re essentially reserving the home so others can’t buy or rent it throughout the entire agreement period.
The Purchase Price
Once agreed upon and signed, both the purchase price and rent amount remain fixed throughout the entire rental period, which typically spans between one and three years.
The agreed price doesn’t fluctuate with Houston market conditions, regardless of whether property values rise or fall. This represents one of the major advantages of the rent to own approach in Houston – you can secure a home at today’s price but delay the actual purchase for 1-3 years, with no price increases during that period.
The Option Fee/Upfront Payment
The buyer pays an option fee to the seller before moving into the property. This amount varies depending on who you’re working with and the home’s price, but generally ranges between 1-5% of the total purchase price. This payment is typically non-refundable if you decide not to purchase the home when the agreement ends.
This option of buying a house in Houston with a rent to own agreement is particularly beneficial for potential buyers who might not currently qualify for traditional mortgage financing due to credit challenges or other financial limitations.
For sellers like us, rent to own programs expand the potential “buyers pool,” allowing us to help more families achieve their homeownership dreams.
For buyers, it creates a pathway toward homeownership and lets you experience that special pride that comes from living in a home you’re working toward owning.
What Happens When The Rent To Own Agreement Ends?
The primary goal of entering a rent to own home in Houston Texas is to use the rental period to improve your credit score and strengthen your financial position so you can qualify for traditional mortgage financing.
Throughout this period, you should actively work on boosting your credit score, building savings, and consulting with a local Houston mortgage broker or bank to get pre-qualified BEFORE your rent to own agreement expires.
When the rental period concludes, you as the tenant/buyer can choose to either purchase the house at the predetermined price outlined in the agreement, or you can decide not to buy and walk away, just as you would with a standard rental property.
If you decide not to purchase the home, that’s completely fine. You can relocate to another property or, in certain circumstances, you might be able to renegotiate the rent to own agreement to extend your timeframe for securing mortgage financing.
With our local Houston Rent To Own Program, we’re dedicated to helping you achieve your homeownership dreams. We understand that financial readiness takes time, which is why we offer flexibility when you need additional months to strengthen your finances and meet banking requirements before finalizing your home purchase.
Like any home purchasing method in Houston, our rent-to-own approach comes with specific advantages and considerations for both homebuyers and property owners. Understanding these factors thoroughly is crucial for making a well-informed decision.
We encourage you to thoroughly research your options – browse our website, review our detailed Frequently Asked Questions page, or contact us directly at 713 379 8768 or send a message through our Contact page to discuss our local rent to own program in greater detail.
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