Is Rent-to-Own an Option for You?

In Virginia, the terms “rent-to-own,” “rent-purchase” and “lease-purchase” are often used interchangeably, but they usually mean the same thing: a renter pays to live in a home with the option of buying the property at a future date.

As you can imagine, these leases and situations differ from standard rental agreements. It’s important to know the details and understand what works best for your situation.

GOOD TO KNOW
You should always speak to a HUD-approved Housing Counselor before signing a lease agreement of any kind.

Here are some questions to ask yourself before entering into a rent-to-own agreement:

• Do I really want to buy this property? Does it meet my family’s needs? Will it continue to meet my family’s needs in the future?


• Is the property worth the purchase price the landlord is asking? Get an appraisal. An appraisal should be done to determine the true value of the property before entering into a rent-to-own agreement.


• Is the length of the agreement feasible? If I can’t get financing now, what is the probability I will qualify for a loan later? In some cases, the tenant is required to pay the remaining balance at the end of the lease term. Keep in mind that a traditional mortgage term for first-time homebuyers is 30 years. Rent-to-own buyers should be cautious of rent-purchase terms that exceed 30 years.
  
  
• How much of the rent payment is set aside (escrowed)? How can the funds be used? For example, will the funds go toward the down payment?


• How much money will be due at the end of the lease term, if any?


• What happens if I become delinquent on the monthly payments?


• What happens with the escrow account if I can’t get financing by the expiration date, or if I simply change my mind about buying? Will I lose the escrow funds?

Learn more about your rental options by signing up for our free renter education course!