In the current economic climate, buying a home has become a more difficult proposition. Mortgages are extremely difficult to get, even for those who have fair credit rates, not to mention those who have less than perfect credit. Since it’s harder than ever to buy a home, one new option that is becoming a popular choice for those who dream of having their own home is the lease option. This option gives potential homeowners the ability to move into a home without throwing away money on a traditional rental agreement. The lease option comes with some great benefits to both homebuyers and sellers as well as some great economic and community benefits as well.
Understanding the Lease Option
First, you may be wondering what is a lease option. Simply put, this option refers to a situation when a potential homeowner decides to rent a home for a specific time period and then is given the option the home when the rental period is up. The price for the home is predetermined, which means potential homeowners can lock in the purchase price in the beginning. In some cases, this is referred to as the rent to own option as well. While it’s not a new concept, it has recently seen a huge rise in popularity, since easy mortgages are a thing of the past.
How Rent to Own Works
When you decide to go with the rent to own or lease option, there are some specific steps that will be followed. First, before you ever move into the home, the buyer and seller (owner) will have to agree on the purchase price of the home. Other terms for the sale are agreed on at this time as well. The next step is for the buyer to pay a special fee to the seller in order to lock out other buyers. This gives them the right to buy the home and prevents the seller from being able to rent or sell the home to someone else.
After the purchase price is agreed upon and the lease option fee is paid, then the buyer can move into the home. For the agreed on length of time, the buyer will pay rent to the seller. In most cases, this rental period lasts between 1-3 years. Some of the rent that is paid during this time will be put towards the price of the home. This rent to own credit will reduce the amount owed when the buyer is ready to purchase the home. For example, the rent may cost $800 a month. $400 of that rental amount may be designated to be the rent to own option credit. This means that over two years, the seller will have accumulated $9600 that will go towards the purchase of this home.
Lease Options Help Homebuyers and Sellers
The great thing about the lease option is that it offers homebuyers and sellers some advantages. It provides a win-win situation that both will benefit from when choosing this option. The homebuyers will benefit from having extra time to improve their credit and to come up with a way to finance the home. Sometimes this can include saving for the down payment on the home as well. During the process, homebuyers have a place to live, which is a huge advantage.
The seller also enjoys some advantages when going with the rent to own option. They can take the home off the market and enjoy rental income while knowing they will be selling their home. It’s also fairly easy to find people who want to enjoy this option, which keeps buyers from spending months trying to deal with the hassle of selling the home.
Economic and Community Benefits
Of course, the lease option provides some great economic and community benefits as well. One way this is helping the economy is that it is helping to keep the real estate market moving. Those who have gone with the rent to own option in the past few years are now seeing their lease mature and they are going on to purchase the home. As people continue to choose this option, it offers a great way to keep the real estate market moving in a time when it’s extremely tough to get a mortgage. Also, since this keeps homes from sitting empty, it helps to boost prices for other sellers in the area. Empty homes sitting around drive down real estate prices, but the lease option helps to keep people in these homes.
Last, even the community benefits from people taking the lease option. This option puts families in homes instead of letting homes stay empty, which drives down home values in the area and can be a magnet for crime. In the end, the homeowners, sellers, economy and the community can all benefit from people choosing the rent to own route.
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