Chris Gmyr

The housing market is finally stabilizing, and right now, the price of buying a home is as cheap as it’s ever going to be. This is a good time to take advantage of market conditions. But what do you do if you don’t have good credit or the money for a down payment?

Consider a lease-to-own agreement.

A lease-to-own agreement, also known as renting-to-own, allows you to move into the perfect house now, locking in a low market price instead of waiting and watching home values climb before you are able to buy. Sellers are likely to consider this type of arrangement right now because this is a hard time to sell a home. There are more homes for sale than there are people to buy them. Many sellers are looking for a way to get the homes out of their hands without losing money. Renting-to-own provides the perfect solution.

A lease-to-own agreement involves several things. Like any home purchase or rental, it requires a contract. A typical agreement lasts one to three years. An initial upfront payment, usually a few thousand dollars, is paid as a deposit on the home. The rent agreed on is fair market value, plus extra to be set aside with the deposit. At the end of the lease agreement, this money is returned to the buyer, to put towards a down payment.

The extra money tacked on to the rent that goes towards your down payment is usually around $200. This doesn’t seem like a lot, but if your lease lasts two years, and you paid $3,000 as a deposit, you will have almost $8,000 towards buying the home. Depending on the price of the home you are buying, this may be half of the recommended 20% down payment, a significant amount.

During the time that the home is being leased, the buyer has the opportunity to get ready to buy the home. This is the time to concentrate on saving a down payment and fixing up any negative marks on your credit. This is also the time to “test drive” the home, making sure that it is what you really want.

You will have the option to buy the home at any point during your lease period. If, at the end of that time, you decide not to buy, you forfeit the deposit you originally paid, along with all of the extra rent that you have been paying towards the down payment. That is part of the risk associated with a lease-to-own agreement. What this means, however, is that you do still have the chance to back out of the agreement if you decide that you don’t want the home, even if you do lose your investment

When considering a lease-to-own agreement, one of the most important things that you can do is to very carefully read the contract before you sign. If you have any questions or concerns, have a lawyer read it over for you. Although it is rare, there have been times when sellers add clauses that allow them to evict hopeful buyers over minor issues, making a profit before selling to someone else.

If you get the chance at a lease-to-own option on the house you like, take advantage of it. Work hard to save up the money you need for the down payment, and get your credit in order. Especially if you are a first time buyer, a lease-to-own agreement can be one of the best ways to get into a new home.

Buyers, what would be some more reasons to consider buying through a lease-to-own program?

Sellers, would you consider selling your home this way?