Frequently Asked Questions

Lease option transactions are also known as rent to own, or rent to buy transactions. In a lease option, the landlord-seller leases the home to the tenant-buyer and the tenant-buyer has the option to purchase the home for a pre-determined price at any point prior to the end of the lease. The main components of a lease option transaction are the lease term, the purchase price, the down payment, and the rent credit.

Lease purchase transactions are similar to lease options; however, rather than granting the tenant-buyer the option to purchase the home, lease purchases contractually obligate the tenant-buyer to purchase the home.

“Owner financing&rdquo agreements and “land contracts&rdquo have similar payment schedules to that of lease options and lease purchases; however, these agreements enable the buyer to purchase the home and obtain title at the beginning of the transaction. The seller, instead of receiving a large cash payment at the time of purchase, as he/she would in a conventional sale, serves as a lender for the remainder of the agreement, and collects monthly financing payments from the buyer. When the owner financing agreement or land contract expires, the buyer obtains third-party mortgage financing and fully repays the seller loan.

Please see our Benefits page to read about the benefits of rent to own.

The concept is not new. Buyers and sellers have been structuring rent to own transactions for decades. However, recent changes to lending standards have made it challenging for many aspiring homeowners to secure a traditional loan, and rent to own has become a popular alternative.

Please see our Transaction Overview page.

A rent credit is the portion of the monthly rent that is credited towards the purchase price of the home at the end of the transaction. The monthly rent credit payments are typically retained by the seller until the buyer exercises his purchase option. Savvy tenant-buyers often insist on using an escrow account to protect their investment against a Seller default.

There are two major components of a rent to own agreement: 1) a lease that includes the monthly payment, term, rent credit and other customary provisions, and 2) the purchase option, which grants the tenant-buyer the option to purchase the home at an agreed upon price at any point prior to the expiration of the lease.

Taxes and homeowner insurance are typically paid by the seller of a rent to own until the tenant-buyer completes the purchase.

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Please see our Benefits page to read about the benefits of rent to own.

Potential buyers have historically included the following:

• Families who want to improve their financial profile (i.e. save more money and restore any credit problems) over the course of a lease in order to obtain an affordable mortgage at the end of the lease
• Families with impaired credit who are presently unable to qualify for suitable mortgage rates due to credit issues
• Families who want to try out a home, neighborhood, or school district before committing to it long-term
• Families who are tired of renting and want to take positive steps towards home ownership
• Real estate investors

iRentToOwn has partnered with credit experts to help you improve your financial profile over the course of your rent to own lease. You can easily download a free credit report or sign up for a free credit consultation.

No. The seller will grant you the option to purchase the home, but the decision to purchase is entirely up to you.

Your down payment and monthly rent credits are non-refundable. If you do not execute your purchase option, this money will not be returned to you. This is one of the critical risks of rent to own transactions, and it is why tenants should be extremely cautious before entering one.

Although it is hard to find reliable statistics on the rent to own real estate industry, most experts would agree that purchase rates are very low, likely below 10%. The fact is, most tenants are unable to secure a home loan before the end of the rental period. This is generally the result of three primary causes:

• Because landlords collect a large upfront deposit and a monthly rent premium, they are well protected in the event the tenant chooses not to purchase the home. As a result, they rarely do a sufficient job of screening prospective tenant-buyers for strong financial profiles
• Tenants are often too optimistic about their ability to improve their FICO score or accumulate savings during the rental period
• Tenants are reluctant to seek professional assistance to achieve their financial goals

Most importantly, prospective tenant-buyers should not do a rent to own transaction unless they are extremely close to being able to qualify for a conventional mortgage today. Too often, tenants bet on the fact they are going to get a raise at work or receive a big inheritance from a relative. Once in a rent to own transaction, the tenant-buyer should set realistic financial improvement objectives and schedule a reasonable timeframe for achieving those objectives. Tenant-buyers should seek assistance, when appropriate, from professionals like credit improvement consultants. iRentToOwn.com's partner, offers a free credit consultation.