The rent to own sector is an attractive option for many because of potential credit issues, lack of capital or even the financing options that are available to them. With the recent upsurge in the housing market, buying a house through a traditional mortgage can be difficult with all the financial requirements needed. Many families cannot simply afford the higher payments and the larger down payment needed to avoid PMI fees. Rent to own homes are options that do not involve the bank or need to go through the endless processes traditional mortgages require.
Mortgages of the traditional sense are different because of their processes. Majority of mortgage seekers must get a preapproval process through their lender and then search for homes based off their preapproval amount. This process is pretty straight forward with the parties needing to fill the bank requirements including inspections, approvals, down payments and other needs.
The rent to own processes may or may not use a lawyer or a realtor to help guide the process. These transactions are usually for 2 to 3 years in agreements where the party that wants to buy the home essentially rents it out from the owner. Then the renter may choose to purchase the home, these acts as a down payment towards the house.
These two options vary in terms of processes, interest rates, financial structures and the parties needing to be involved. It’s best to consult with your bank or realtor to see what options are available to you. Additionally, you should check out the state regulations and housing market trends in your desired area to see the best solution for you.