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How a Rent-to-Own Arrangement Works

By Tiffany Raiford

Perhaps you have heard of the increasingly popular rent-to-own venture. Many sellers and homebuyers are opting to use this as a method of buying and selling to those who cannot afford to actually purchase a home with a typical home loan in Pennsylvania. Learning all you can about rent-to-own can help you make an informed decision when faced with this particular option.

What is Rent-To-Own?

Rent-to-own essentially is an extended purchase contract. Sellers agree to rent their home to families who want to buy but need more time to come up with the money to make a down payment or to line up financing to purchase the home. For the most part, many sellers agree to a term that equates to a few years. This provides the family living in the home up to a few years to save enough for the down payment required to obtain financing on the home while the seller collects rent.

How Buyers and Sellers Benefit

Buyers benefit from this purchase option because they get to purchase they home they want for the current price at a later date. For example, if the market is down right now and a seller agrees to rent-to-own with the current purchase price, they cannot raise that price even if the market increases significantly. Sellers benefit because the person living in their home wants to purchase that home. This means that the renter is going to take care of the property.

What You Need to Know

Before you agree to the terms of a rent-to-own contract as a buyer, you need to visit the bank. By doing so, you can get an idea of what you are looking at in terms of approval. Even if you need the time to rent to come up with a down payment to secure a mortgage, it helps to know what you will be approved for. This allows you to secure a rent-to-own property that is within your budget. You also need to know that when you sign a rent-to-own contract in Pennsylvania, you are agreeing to the terms of the contract. If you fail to abide by the terms, you will face penalties and future problems. Do not sign unless you are financially able and willing to purchase this home at the end of your rental lease.

Rent-to-own properties are increasingly popular in Pennsylvania. The terms and conditions are beneficial to both buyers and sellers. However, you should still treat this type of transaction as you would a typical sale. This means making sure the agreed to purchase price is reasonable, the terms are appropriate and you should make all of your rental payments by check. This allows you to have proof inc case the seller tries to claim you violated the terms of the agreement as a way of breaking the agreement if a better offer should arise.

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