If You Can't Buy My House, Rent to Own It
It’s a concept that’s coming into vogue. But is it right for you?
How It Ideally Works
Let’s say that you find someone who is interested in buying the house but can’t because their credit isn’t quite right. This is how a lease option should work:
- After securing the go-ahead from a mortgage broker and before moving in, your potential buyer will give you a healthy, nonrefundable deposit to go toward the down payment of the house -- typically, 3 to 5 percent of the purchase price.
- The buyer rents your house for a period of time -- usually two years -- and during that period, they pay you monthly rent. A portion of the rent also goes toward the eventual down payment of your house.
- After two years, according to your contract, your renter has the option to buy the home, with all of the down payment money going toward the purchase price, and since they’ve put a considerable amount toward buying it, they generally choose that option. If they don’t, the seller keeps the down payment money.