THE BENEFIT OF A RENT-TO-OWN ARRANGEMENT FOR THOSE WITH LESS-THAN PERFECT CREDIT.

Rent-to-own arrangements, also known as lease-option or lease-to-own agreements, have been gaining popularity in recent years as a way for people with less-than-perfect credit to eventually become homeowners. But what exactly is a rent-to-own agreement and how can it benefit those with less-than-perfect credit?

In a rent-to-own agreement, the tenant rents a property for a certain amount of time, typically 1-3 years, with the option to purchase the property at the end of the rental period. The tenant typically pays a higher rent than market value, with a portion of the rent going towards the purchase price of the home.

So, why would someone with less-than-perfect credit choose a rent-to-own agreement over a traditional mortgage? For starters, rent-to-own agreements often require less of a down payment or none at all, making it more accessible for those who may not have the savings for a traditional down payment. Additionally, rent-to-own agreements often don't require a credit check, making it a viable option for those with less-than-perfect credit.

But perhaps the biggest benefit of a rent-to-own agreement for those with less-than-perfect credit is the opportunity to improve their credit score. During the rental period, the tenant is responsible for paying their rent and any additional costs associated with the property (such as utilities and maintenance) on time. This can demonstrate to future lenders that the tenant is capable of responsibly managing their finances, ultimately helping to improve their credit score.

Now, let's talk about the elephant in the room: what happens if the tenant decides not to purchase the property at the end of the rental period? Well, just like any other rental agreement, the tenant would simply move out and return the keys to the landlord. However, it's important to note that any money paid towards the purchase price of the home is typically non-refundable.

In conclusion, a rent-to-own agreement can be a great option for those with less-than-perfect credit who are looking to eventually become homeowners. It offers a chance to save up for a down payment, improve credit scores, and even test out a neighborhood or property before committing to a purchase. Just make sure to read the fine print and be ready to "rent with a purpose".

Until next time,

Bridgehome Solutions Team