How to Avoid Common Rent to Own Fumbles

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Depending on where you go on the internet, some people will say that using the Rent to Own method of buying a home is irresponsible or, at worst, a scam . . . typically due to some bad experience. While there are definitely horror stories associated with buying a home the traditional way as well, a good percentage of the bad stories coming from Rent to Own haters could have been prevented by taking some necessary steps and paying extra close attention to the details when signing the lease agreement. Often simple things like not knowing how much you can afford–things that would be obvious during a traditional sale, when the lender says “no”–lead to less than desirable results. Here are some common mistakes people make to that Rent to Own buyers should be sure to avoid:

Being unrealistic about your finances – Many reputable sellers will run a background check on your credit score to let you lease a Rent-to-Own property, and each will have their own requirement for a  minimum credit score. Having a realistic conversation with a financial adviser about your financial situation can let you know what you are in for–and what it would take to get things back on track if your credit score is much lower than you’d like. If some factor makes it not feasible that you’ll get through the leasing period and qualify for a mortgage, you shouldn’t sign on to a Rent to Own agreement. If your credit is far outside of current underwriting standards, you should consider seeking the services of credit fixing companies and financial advisers to help put you on the right path.

The option fee funds not being in an escrow account – When you are paying your rent to the seller each month, you are also paying the option fee on top of that. The option fee is the collateral that you pay for the seller taking the home off the market with the hope that you will buy the home at the end of the leasing period. Since this money will go toward your down payment should you decide to purchase the house, you want to be sure the money is safe and secure. By placing it in an escrow account, it ensures the security of the funds from those looking to take it, including the seller. Do not let a seller put the money in his/her own banking account.

Not having the home inspected professionally – The last thing you want is for the home you buy to become a total money pit with problems that you didn’t know about until after purchasing the home. While there is an upfront cost of a few hundred dollars to have a professional home inspector come out to the house, it will be worth it to save possibly thousands of dollars in future repairs you’ll have to make yourself. Some problems may not be cosmetic, but in the walls, under the floors, or otherwise hidden from view, so having the home thoroughly checked over is a great example of “better safe than sorry.”

Not reading the fine print – You’ve probably heard this over and over for other contractual deals you’ll make in life, but this instance is no less important. The agreement you will sign to begin the Rent-to-Own process will be set in stone, so be sure to review information concerning the following:

  • How much is your rent per month?
  • How much is your option fee per month?
  • Where is the option fee being held during the duration of the leasing period?
  • How long is the leasing period?
  • What, if any, maintenance costs are you responsible for?
  • Will you receive any financial assistance from the seller in any capacity?
  • What changes/augmentations can you make to the home during the leasing period?
  • What will the final price of the home be once the leasing period is over?
  • What are your rights as tenant?
  • What happens if you decide to either not purchase the home or want to leave the lease early?


Not seeking financial services during the leasing period – If your credit needs improving to qualify for a mortgage or you don’t have enough money for a down payment for the house at present, you should definitely seek out professionals who can help you to fix your credit score as much as possible and make a financial plan for you to start saving immediately for the down payment. If your credit score is decent already, find a mortgage lender to pre-approve you so that you are assured of being able to qualify for a loan when the time comes. This home will be one of the biggest investment for you in your life, so don’t leave anything to chance.

While not every experience will be positive while engaging in Rent-to-Own arrangements, you can prevent some of the more costly ones be simply being aware of the situation, what you are signing, and what you are responsible for. If you are unsure of anything, either ask the seller or a real estate professional who specializes in Rent-to-Own properties in your area.