There was a time when, thanks to subprime lending, just about anyone could buy a home. Since credit crisis, it has gotten significantly more difficult to get a mortgage. In fact, unless a person has credit score is at least a 620 and they can verify your income, the chances of them being approved for a mortgage are slim to none.
For this reason, many people are turning to rent to own homes to help them achieve their dreams. This allows them to rent the home for a predetermined period of time and then purchase the home at the end of the rental period. This gives them the time that they need to restore credit and document their income.
Renting to own can have both emotional and financial benefits. People feel like they have their “own” home, because they can make improvements and plan to actually buy the home some day. It allows them to become part of a community without fearing that they will just be moving in a year. Also, as long as they do what it takes to qualify for a mortgage at the end of their rental period, they do not have to worry about someone else buying the home out from under them. During the rental term, the seller may not sell the home to anyone.
They also build up equity in the home because a portion of each payment that they make is a rent credit, which goes towards the purchase price. Because the purchase price is typically set up front in a rent to own contract, if by chance the value of the home does go up, they get to participate in the appreciation. Another key advantage of renting to own is that if the contract is structured properly, chances are you will not have to make a down payment when you go to get a mortgage.
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