A rent-to-own home is the same as what is also known as a lease-to-own home (or sometimes a lease option, etc.)
So, how does rent to own homes work in Colorado Springs, CO ?
HOW DOES A RENT TO OWN HOME AGREEMENT WORK?
It is not that different than leasing a car. In this arrangement, the renter rents a house from the owner and pays monthly rental fees for living there. After a specified period of time, usually two to three years, the renter can decide to purchase the house at a price the renter and the owner have previously agreed upon.
THE RENT TO OWN CONTRACT AGREEMENT – HOW IT WORKS IN COLORADO SPRINGS, COLORADO
The contract which the tenant buyer and the seller draw up should be very clear. You must be sure to understand the nature and terms of the contract perfectly before signing it. Make sure you ask the seller as many question as you need to in order to understand all points. Never sign any document that you are unclear about.
This arrangement has advantages for both buyers and sellers alike, and some huge benefits. By understanding both the pros and cons, you can make a great decision for your family.
THE FINANCIAL PARTS OF THE RENT TO OWN AGREEMENT
First, the seller will set the purchase price and monthly rent for the house.
The Purchase Price
The purchase price is usually retail value for the house in today’s market, and this price is locked in for the term of your agreement, which can be from one to three years. This price will not change during the agreement timeline if the real estate market rises or falls. That’s one of the biggest benefits of buying a house in
Colorado Springs, CO under a rent to own agreement…..you lock in the price of the house today, and not have to actually buy it until the end of your rent to own agreement. The purchase price will never increase.
The Monthly Rent
The monthly rent is determined by the rental market in Colorado Springs, CO and is agreed upon by the tenant buyer and seller.
The Option Fee/Upfront Payment
Frequently, you will be required to pay a non-refundable option fee, which is a set amount of money payable to the seller by the tenant buyer before you move into the house. This amount can vary based on who you are working with and the purchase price agreed upon, but a rule of thumb is usually 2 – 5% of the agreed upon purchase price. This option fee is what locks you into the purchase price at the end of the agreement, as the landlord is basically taking the home off the market for sale during the entire term of the agreement.
The option fee is a non-refundable payment, so be very sure before you pay it that you are serious about the home you are about to enter into a contract for. If you decide not to purchase the house at any point during or at the end of the agreement, you may leave the home without any additional fees, but you will lose this option payment.
This option of buying a house in Colorado Springs, CO with a rent to own agreement works well for buyers who would otherwise be unable to purchase a house, either because of their credit score or they don’t yet have enough money for a down payment.
For sellers like us, the rent to own opens up the potential “buyers pool” so we can help more people get into great homes, because we are flexible with potential tenants who may have a bad credit history.
For buyers, it lets you work toward home ownership and have that sense of pride you feel when you own a home.
The End of the Rent To Own Agreement ……What Happens?
The whole point of a renting to own a home in Colorado Springs, CO is to be able to own the home at the end of it, which requires that, during your rental term, you are working to improve your credit and financial stability so that you can qualify for a mortgage.
So during that period, you need to be actively working on these things….get your credit score up, save up money for a down payment, and find a reputable mortgage broker to get pre-qualified before the rent to own agreement expires.
At the end of the rental period, you as the tenant/buyer have the choice to either buy the house at the agreed upon price, or to walk away from it just like a normal rental house.
If you choose not to buy the house, no big deal. You can move out and onto another house, or under special circumstances you may be able to update the rent to own agreement to give you more time to qualify for a mortgage.
With our local Colorado Springs Colorado Rent to Own Program , our objective is to help you reach your goal of home ownership, so we are willing to be flexible often times if you need some extra time to get things lined up financially and with the bank to close on the home.
Just like with any other way of buying a house in Colorado Springs, Colorado, there are pros and cons for both the buyer and seller.
So do your homework…keep browsing our website and check out our Frequently Asked Questions…..or give us a call anytime at 719-548-4755 or send us an email on our Contact Page to chat with us and learn more about our local rent to own program.