How to Purchase a Rent-to-Own House

Sometimes it can be tough to qualify for a mortgage when you are ready to purchase a home. If that is the case, a rent-to-own home may be a good option for you.

A rent-to-own agreement means that the buyer is agreeing to rent the home for a set amount of time and then he may purchase the home when or before the lease expires. Open House

The Rent-to-Own Contract

When you rent-to-own, you get to move into the house right away but you will have time to work on improving your credit score and saving for a down payment. Typically you would rent the home for a set amount of time and then you will purchase the home. However, it is not as simple as paying rent for that period of time and then buying the house – usually there are terms and conditions that need to be met.

For a rent-to-own property, the buyer will pay the seller a one-time fee which allows him to rent the property for the duration of the lease with the option to buy.  Depending on the contract, they buyer may have the right or the obligation to buy. The agreement should be written up by someone who is familiar with real estate and all of the terms so that the expectations are clear and everyone understands the contract.

The fee collected at the start may or may not be applied to the purchase price of the home depending on the terms of the agreement. If you are going to rent-to-own you want to make sure you understand the wording of the contract.

Purchase Price

The purchase price of the home may be determined before the signing of the contract or it may be left until the lease is up and the price will be determined based on the current market value.  It may be in the best interest of the buyer to agree on a purchase price prior to signing the contract, especially in a market where housing costs are on the rise.


For the duration of the lease, the buyer will pay the seller an agreed amount of rent. Often, a percentage of the monthly rent payment will be applied to the purchase price of the home. The seller may charge a higher rent in order to accommodate for the amount going toward the purchase price of the home.


The terms of maintenance should be specified in the rent-to-own agreement. Mowing the lawn and other general yard maintenance is one thing but having to repair a damaged roof or replace the hot water tank is another. Make sure everyone’s responsibilities are clearly outlined.

The Purchase

Finances and Mouse At the end of the lease, if the buyer chooses not to buy the property or can’t secure financing, the option to buy will expire. Usually any money that has been paid to that point is forfeited including the initial fee and any rent credit earned.

If the buyer is making the purchase he would apply for financing and pay the seller in full. The transaction is finished at the closing and the home will belong to the new owner.