Tell Me Again: How Does Rent to Own Work?

What is the difference between renting and Rent to Own?

How much do you need to put down to move out of the Rental Rat Trap and toward Home Ownership with a Rent to Own property?

Find out here:

Typically, when you rent -- as you probably know -- before you can move in you pay first month's rent plus a security deposit equivalent to one to two month's rent, depending on the owner and/or the how the owner feels about your credit score. So on a rental in the $1,500 range, $3,000 would cover first month's rent and security deposit. If the owner wants two months security deposit, as many owners require, or one and a half month's security deposit, you'll need more than $3,000 to move into a $1,500 per month home.

With a typical Rent to Own, the tenant/buyer puts down an amount as "option" fee, usually beginning in the $5,000 range, plus first month's rent -- so around $6,500 to get into a Rent to Own on a $1,500 per month property. The option fee is what locks in the "first right of refusal to purchase" and locks in the agreed upon purchase price.

Because the owner is giving up first right of refusal and locking in a purchase price in a Rent to Own contract, the option fee is non-refundable. He wants to know that you're serious about buying, and that you will take the steps necessary to qualify for a mortgage -- improving your credit or increasing your income are the usual courses of action -- so that you will follow through with the purchase.

Do you have a tax return coming, or a family member who could help you get into that range do to Rent to Own?

Have you spoken with a mortgage broker to find out what you need to do to qualify for a mortgage, or how soon you could qualify, and for how much?

Lenders are finally starting to loosen up a little bit after the freeze they put on home lending for the past 6 years.

If you think you're close, now is the time to speak with a mortgage broker and take the steps needed to qualify. Home prices and mortgage rates are going up. It's turning into a seller's market again.

Delaying purchasing a home could end up costing a buyer 10s or hundreds of thousands of dollars in additional purchase price and interest payments over what you would pay right now....