Rent To Own House


Many consumers who want to get a rent to own house have bad credit. In a rent to own house contract, the seller is giving you the right to purchase the house in the future at a price that is agreed upon. This benefits a individual with bad credit because it gives a consumer time to restore their credit score, before actually financing the house.

In a rent to own house contract, part of your monthly rent is applied towards your future down payment. Usually, the tenant pays a higher rent during the contract. These rent to own house contracts are usually written up for three years, in which that time the house must be financed.

Sounds like a reasonable deal, if you have bad credit and want to rent to own a house. But, ask yourself this question: Why doesn't the owner just sell the house and get his money right away? The answer: In the event that you cannot finance the house at the end of the rent to own contract, you would lose your deposit money,all up front fees and would have paid a higher rent for nothing. The seller also knows that in many rent to own house contracts, purchasers find that they can't buy at the end of the contract anyway, often for the same reasons they couldn't buy at the beginning of the contract.

The following is a list of things to look for in a rent-to-own house contract: What is the cash price of the house to be rented? What is the price of the rental option? What is the total price (cash price + rental price)? What are the requirements to purchase the house? When can the house be purchased? What happens if you are late with a payment or miss a payment? What are the fees for late or missed payments? Is there a limit on the number of late or missed payments prior to the house being repossessed? Can you get this house for less by paying cash or by buying it from another agent with a traditional mortgage loan?

Currently, rent-to-own transactions are not specifically regulated by federal law, either by the Truth-in-Lending Act (TILA) or the Consumer Leasing Act (CLA). Federal legislation that would specifically regulate rent-to-own transactions has been proposed several times in recent years. Some of the proposed legislation would apply federal and state credit laws to the rent-to-own industry, while other proposed legislation would regulate rent-to-own transactions as leases.

Forty-six states currently have rent-to-own laws that regulate rent-to-own transactions in a manner similar to leases, mandating a variety of disclosures and other requirements. The state laws generally have been supported by the industry but opposed by consumer advocates who believe that rent-to-own transactions should be treated as credit sales. Currently, no state has a rent-to-own law that specifically regulates rent-to-own transactions as credit sales. But courts in several states, most notably Wisconsin, Minnesota, and New Jersey, have ruled that rent-to-own transactions are credit sales and subject to state laws governing credit sales. Vermont does not regulate rent-to-own transactions as credit sales, but does require disclosure of the “effective-APR.”

Before getting into to a rent to own house contract, you should talk to a mortgage professional so they can get you in the right direction so you can purchase the house in the future.