How to Rent-To-Own a Home

You may be at the stage in life where you want to show something tangible for all your hard earned work and money. Becoming a homeowner through a rent-to-own home may be the answer. It is important you determine whether or not this particular path to homeownership is the right choice for you. If you can honestly answer yes to the following questions, then you may be a good candidate:

  • Are you ready to become a homeowner with all its financial responsibilities?
  • Do you have the discipline to get your finances and your credit in order?
  • Will you be in a position to purchase at the time your lease expires?
  • Will you have the discipline to save for a down payment and improve your credit?
  • Will you qualify for a mortgage at the time you exercise your option to purchase the home?

How a Rent-To-Own Agreement Differs from a Lease Agreement

A rent-to-own, agreement allows future owners the option to rent a home with the intention of buying it outright after a period. Renting-to-own is not as easy as renting. You are required to make a commitment, typically two to five years of paying rent, before purchasing the home. Other trade-offs and sacrifices will be expected such as paying off any outstanding debt, cutting down on your expenses, saving for a down payment and improving your credit score to qualify for a mortgage.

The Rent-To-Own Agreement is a Legal Contract

Although your contract is essentially a rental lease, it is more complicated due to provisions in the agreement. The major provisions found in this type of understanding include:

The Option Fee

An option fee is typically collected upfront, ranging from two and a half percent to seven percent and acts as a security deposit. The owner may keep the tenant’s option fee credit if the tenant does not purchase the home.


The a portion of a tenant’s monthly rent is allocated towards the purchase price. If the renter does not buy the property at the end of the period, it will be forfeited.


The tenant has the option to pay for a home inspection at the beginning of the contract and also immediately before purchasing the home. Other inspections may be requested such as a pest report and roof certification before entering into a contract.


Maintenance depends on the agreement between the tenant and the owner. The tenant typically agrees to home repairs and maintenance in the lease agreement.

The Title

The owner retains the title and remains directly responsible for mortgage payments, homeowner insurance and property taxes during the rental portion of the transaction.

The Importance of Real Estate Professionals

Rent-to-Own Agreements are also known as Lease Option Transactions or Rent-To-Buy Transactions. You may come across contracts that appear similar to rent-to-own agreements but are quite different when executed such as:

  • Lease-Purchase Transactions are agreement that contractually oblige the tenant to purchase the home at the end of the rental period.
  • Owner Financing Agreements and Land Contracts have similar payment schedules to that of lease-options and lease-purchases; however, these agreements enable the buyer to buy the home at the beginning of the transaction.
  • It is important to work with a real estate professional that is familiar with the provisions found in your agreement before signing the dotted line. By taking precautions, it will help avoid any financial heartache.

The Path to Rent-To-Own Homes

If owning a home is your number one goal, then you are on the right path. There tends to be a lack of inventory of rent-to-own homes as many sellers are unfamiliar with the rent-to-own agreement. Our site has a variety of listings for rent-to-own properties in your local area. Our listings our updated frequently, so if you don’t see what you want, be sure to check back another time. In the meantime, subscribe to our newsletter for the latest updates

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