Rent to Own a Home - Is it Your Best Option?

Owning your own home is the dream of most people, but for some, it seems to be out of reach. Due to credit issues, or a lack of a down payment, buying a home may not seem possible to many. But, have you considered the rent to own market?

Rent to own has become quite popular. You may only know about stores that offer rent to own furniture, appliances, or other items and perhaps don't realize that there is a big market for homes in this category as well.

One of the main issues with rent to own furniture or appliances is the fact that you end up paying 2-3 times what the product is actually worth and by the time you're finished paying it off it's practically worthless. With homes, it's a different story. So, is a rent to own home the right option for you?

How does rent to own work?

While there can be different variations on any agreement, the basic premise is the same. The owner of the home will rent you the property with the payments going towards owning the home. If you fail to make the payments, the owner doesn't lose out because he holds the deed.

What are the benefits with rent to own and who is this type of transaction for?

A rent to own house is ideal for anyone who has bad credit and wouldn't qualify for any kind of home mortgage, but stills wants the benefits of home ownership.

Even with the higher costs involved, buying a home makes better financial sense than paying rent to someone else and not getting the benefits it provides. Rent is not tax deductible and you're not building up equity.

What are the disadvantages?

While rent to own is an easy way to buy a home, there are many drawbacks that you need to be aware of.

1. Have everything agreed to and in writing before moving in and signing any papers. This is where many people get burned and fail to realize the consequences until it's too late.

2. If you fail to make your payments, the owner can take back possession, leaving you with nothing.

3. The price you'll pay for a home on a rent to own basis will be considerably higher than with a standard mortgage loan.