Qualifications for Rent-To-Own
A rent-to-own agreement is a great way to purchase a house, while you get your finances together. The buyer’s monthly payment is a sum of a rent premium, and an option fee toward the home’s total purchase price. Certain requirements are common in order to be considered:
You must be able to prove that you have the means to eventually purchase the home. The homeowner will require proof that the buyer can pay the rent and option fees. Financial documentation will also be requested by the homeowner. Financial documentation will include copies of paychecks and tax returns. If you are self-employed, you more than likely be asked to provide a statement of profit and loss figures. You can also ask your clients for letters showing that you have commitments for future work.
In order to be a good candidate, you must have a great personal history background. The homeowner will research the buyer’s credit history, looking for any flaws. If the candidate has a low credit score, and/or any black marks on it, they will be charged higher interest by the homeowner, aside from likely being denied altogether. The tenant’s history and criminal background will be checked, as well as any other previous or existing legal problems.
The terms for a rent-to-own agreement are worked out between the homeowner and the buyer. The landlord will set his own qualifications for the buyer, like the minimum down payment required, if any.
The Bottom Line
A rent-to-own agreement allows potential buyers to move into a house while getting their finances in order to purchase the home several years in the future. It does come with a risk; the potential buyer could very well end up losing money if they cannot buy the property when the lease expires.
A rent-to-own agreement is a legally binding contract that often includes complicated language. You should consult with a realtor, and it would not hurt to consult a lawyer, either. No matter what terms you are purchasing a house, you should understand every word of a contract before you add a signature, in order to clarify your rights.
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