When Renting-to-Own Makes Sense

If you’ve heard of rent-to-own and it’s benefits, you may wonder when, and if, this type of homeownership is suitable for you.  If you’re considering a rent-to-own home, but wondering if a traditional mortgage or less-trendy (but secure) lease-to-own agreement suits you best, read on for our advice on the matter.


First Consideration:  Loan worthiness

First, take your loan-worthiness into account.  This is how likely you are to be approved by a lender for a mortgage (at a favorable interest rate).  A lender will look at several things before deciding. Major factors include your credit score, your debt-to-income ratio, and your employment history. 


Generally, lenders will be looking for a credit score above 600 – otherwise, you may need to turn to loans that specifically service people with lower credit scores such as HUD Homes.  If your credit is good, consider your debt-to-income ratio. This is how many loans you have out currently that you have to pay back. A lender wants to make sure their loan will be paid back before other loans you have.


Your employment history can also make a difference.  If you have long periods of unemployment or move from job to job frequently – this may indicate that you are at risk of becoming unemployed and unable to pay your loans.  


Second Consideration:  Your Long-Term Goals

With a home purchase, some people take out a loan and intend to only pay on the loan for about 5 years, and then sell the home.  If you are not planning on investing 5 + years into the home, then a more traditional mortgage may be your style.


Also, consider other things that could impact your length of residency.  For example, military families may move around a lot – and in this case a VA loan or rental may be better for your circumstances.


Rent-to-Own is a great investment but does require an investment of time as well as you will be paying money towards the home purchase as part of your rental payment.


Third Consideration:  Likeability of Home and Neighborhood

Like any decision around a big purchase like a home, it’s best to not rush in without thinking it through.  Carefully weigh the pros and cons of the above, as well as the home itself. How do you feel about the neighborhood the home is in? Is it an easy commute to your current or potential future jobs?   Do you feel like the neighborhood will improve in value over time, making your investment worth it? Think about all of the things that could impact your day-to-day life before making a decision.


If you’ve decided renting-to-own is right for you, you are in luck.  Housinglist provides the most up-to-date listing of rent-to-own homes nationwide.  Take a look around and see if you spot anything that interests you.