How to Rent-To-Own a Home and Determining if This Option is For You


How to Rent-To-Own a Home and Determining if This Option is For You

If you're in the market for a real estate purchase but aren't quite ready to make the full commitment to a mortgage, then you may want to consider how you can rent-to-own a home. Homeownership has a significant amount of financial responsibility attached to it and it's important you have your finances and credit in order before taking that step. A rent-to-own home can provide you with the time you need to save up money and build your credit before applying for a mortgage.

Rent-to-own vs lease

A rent-to-own home is not as simple as renting an apartment or a house as it takes more of a commitment. After a period of time called the "lease period" you will get the choice of purchasing the home you've been renting. You should spend time reducing debts, saving money, and building credit so you are better prepared to take on the responsibility of owning a home and qualify for a loan.

Here are some of the key points to examine when considering how to get started with a rent-to-own home.


In a rent-to-own agreement rent is a little higher than normal rent on an apartment or a home of similar value. The reason for this is due to rent premiums. The rent premium is the portion of your rent which is applied towards equity in the home. The accumulated rent premiums contribute to your down payment once you're ready to buy.


Maintenance is an important aspect of a rent-to-own lease that you'll need to consider due to the increased costs of having the responsibly of upkeep on the home. Fortunately, maintenance is a fully negotiable aspect of a rent-to-own lease contract.

The Option Fee

The option fee is paid at the beginning of the lease period and is used much like an advanced down payment on the home. This fee is usually around 5 percent of the purchase price of the home.

The Title

While you're in the lease period the home is still owned by the seller.

Inspection and appraisals

You will likely want to considering having an inspection and appraisal done on the home prior to moving in and signing a lease. The inspection can reveal any flaws with the home that will likely become an expense in the future. Plumbing issues and foundational cracks are two of the more major issues to be concerned about. Getting both the inspection and appraisal will ensure that you're paying a fair price for what you're getting.


Given that the lease agreement is a binding legal contract, it's a very good idea to have the contract reviewed by a real estate attorney prior to signing the agreement. This is just another step that helps ensure you're getting the best deal possible.