Can someone walk me through the process of a rent to own home?

Have an attorney look over your contract—best advice I can give you.

Questions include but are not limited to all terms, payments, effective interest rate, rent to purchase price ratio, liability, insurance, taxes, repairs.

I knew of a guy a few years ago that had rent-to-own properties. He had people in and out of them because, however the contracts were written, he would keep the down payment and have them out because of the smallest infraction. Do consult with an attorney. And yes, there are background checks. Cover your behinds.

There are lots of factors to watch for in a rent/lease with option to buy contracts. The terms of the contract are very important and very rarely are in the favor of the buyer and the Deed will most likely remain in his name. Your original down is looked at as security to the seller to hold you to the contract. Only part of your rent will go towards the purchase price of the house. Another important item is how long will he carry. The norm is ususally 5 years but I’ve seen contracts from 3 to 10 years. At the end of the contract with him you will have a balloon payment to him for the balance. This is the time you will hopefully convert the loan to a conventional loan with a bank. Your next challenge will be your credit rating. Will it stand up to a loan or will you have to go with private money that will be very expensive and both may require more down. If you can’t get a loan to make the balloon payment you will lose your down and anything you have built up. Remember also he may be buying it himself from someone else at the same time he’s selling it to you, this is called wrapping a loan. What happens if he defaults to his lender, you will most likely lose again. These are only some of the pit falls. The contract will be very complex and only an attorney will be able to help you. Please be very careful. Don’t put any money down you aren’t willing to lose. Good Luck!!

Most rent-to-own contracts state the property owners will reduce their selling price by whatever amount you’ve paid while renting with them. I agree with others though, look over any offered contract because sometimes you can get the owner to agree to give you first bid on the property when it goes for sale.

Even when renting then credit checks are involved, I’m in the same boat as your family and while we are looking to rent right now, our foreclosure is soon to show on the credit report. The local market will determine though how much of a stigma this really is though. Where I live then the foreclosure rate is over 35%, owners from all walks of life are in the same boat and rental home owners are having to look at a bigger picture than credit scores.