So you’ve found the home of your dreams! It’s in a fantastic neighborhood! The taxes are affordable! It needs no major repairs! It’s got just the right sized yard and a garage! It’s listed as a “Rent to Own” home. What’s that mean?

A rent-to-own home is also known as a “lease purchase” or “lease option”. A home is leased (rented, basically) in exchange for a monthly payment each month, with the intention that you will buy the home when the lease agreement expires. A pre-determined deposit is usually required and used as “down payment” towards the home after the lease is up. In some cases your monthly payment is inflated above market prices, with the extra potion of the monthly payment being set aside in “escrow” to go towards your down payment as well. While you are renting, you can work on improving your credit history, save more for your down payment and closing costs, obtain first mortgage financing, and be ready to purchase the home when the lease is up.

Sounds great, right? Not so fast.

Let’s say your rent to own terms are: $1,000 a month with 10% of your payment being set aside in escrow to be used toward your down payment. You must put $2,000 down, and the agreement is for three years. In that three years time you will pay the landlord $32,000! You will have $5,600 set aside to buy your home (Your $2,000 down payment and the 10% every month in extra payments above market price that was set aside).

You will also want to have a real estate agent give you comparables in the area to ensure the price of the house is reasonable You will want to have a house inspection to ensure the house is in good shape, title search to see that the seller can pass a clear title over to you, and the advice of a real estate attorney before you sign the agreement. These will add to your up front costs.

But what if, after 3 years, your credit still isn’t healthy enough for you to buy the house? What if you’ve been offered a promotion elsewhere and no longer want to buy the home? Your landlord can either renegotiate the contract or lease it to someone else, it’s their choice. Depending on the terms of the contract, you will probably lose the $5,600 you had set aside in escrow! Don’t forget those other upfront costs you incurred.

Still think the only way you’ll be able to buy a home is by rent to own? With our help, you might have better options.

The HomeOwnership Center of Greater Dayton has down payment assistance programs that will help you get into the home of your dreams; without the potential of rent to own scams or negotiations with landlords! We can find a program that fits just right for you, and assist by providing down payment money for your first home purchase!

Don’t know where to start? Unsure of the whole home buying process? Let us be your advocate in becoming a first time home buyer! You’ll receive one-on-one attention from an advisor who will guide you towards having the credit history needed to buy a home. Our Lending department will help you through the process of getting approval on your first mortgage. We are always here to ensure you become and remain a financially sustainable homeowner!