For many people, owning a home someday is their ultimate goal. While some of us are fortunate enough to have the resources to purchase a house outright, the average individual does not have adequate finances for such an investment. This is particularly true for young people who have just graduated from college or have just started a family. For these hopeful homeowners, the next best thing (and the most practical) is to look into rent-to-own homes. There are hundreds of houses out there that you can rent and decide to purchase when your rental contract expires. Also called a lease, rent-to-own works very well for people who do not have the necessary funds to buy a house right away.
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Probably the people with the most to gain by choosing rent-to-own homes are those who have bad credit. It is no secret that borrowers with low credit scores are usually given higher interest rates by lenders if their home loans are approved. If you have a low credit score, mortgage companies will look at you unfavorably and slam you with adjustable rate mortgages that increase over time instead of the preferred fixed rate mortgage. And if you choose to buy a house right away while your credit score is still low, you might be able to get approval for a housing loan but in the long run, you will suffer due to the steep payments and high interest rates. Furthermore, you also stand a good chance of losing your home if you fail to make the necessary payments in time.
If you choose a rent-to-own home, you will have a considerable amount of time to improve your credit score before attempting to actually purchase the house. In the meantime, you can move into the house of your choice. Of course, you won’t be the official homeowner, but basically a renter who will be paying rent on it for a couple of years. During this period, however, your credit score may go up so by the time your rental contract expires, you will be qualified for excellent mortgage terms, allowing you to purchase your dream home without additional hassles.
Another type of potential homeowner who can benefit from choosing a rent-to-own home are those who are still on the fence as to whether or not they truly want to purchase a house. If this is you, you can get a feel of how it is to “own” a house without technically owning one. You can become familiar with the various responsibilities involved with being a homeowner such as house repairs, tending to a yard, and interacting with neighbors. By the time your rental agreement ends, you can decide if you are ready to deal with all the issues that come with being a homeowner. Your rental contract gives you the option whether or not you want to buy the home.
On the side of the homeowners, rent-to-own contracts are practical if they plan to put their house on the market but they aren’t ready to do so just yet. Perhaps they are biding their time until property values increase, or maybe they want to earn a profit from their house before letting go of it completely. Whatever the reason, a rent-to-own option allows homeowners to get regular income from their house even if they don’t live there anymore.