Having a less-than-stellar credit score can get in the way of many things, including home ownership. However, bad credit does not mean you can't get the home of your dreams; a rent-to-own option may be the perfect opportunity for you.
If you have bad credit and think you'll never own a home, it's time to perk up. A rent-to-own agreement may be the perfect alternative solution to homeownership. There are two types of agreements that can help you own a home. The two agreements are known as a "lease option" and a "lease purchase."
The first type of agreement, a "lease option" , gives you the option to buy but does not always require a purchase. The second type, a "lease purchase", commits you to buy the property at the end of the lease. It's important you are sure you understand the difference and the pros and cons before you sign.
If you choose the lease purchase agreement, you agree to rent the home for a set amount of time before actually purchasing the property. The lease purchase option requires that before the lease expires, you must purchase the property which means you would need to qualify for a mortgage before the end of the lease and purchase the home in a traditional way.
The good thing about a rent to own agreement is that you can move into a house right away, with several years to work on improving your credit score and/or saving for a down payment. You also can lock in the price you would like to pay. You and the seller will draw up the agreement, which will include important terms that should be favorable to both you and the seller.
Be sure you speak to a professional to help draft a contract that protects you and your rights. Many states will have their own regulations, so be aware of your local laws as no two rent-to-own contracts are alike.
To ensure you fully understand the aspects of a rent-to-own, it's important to note that a rent-to-own does not mean that you pay rent and after a certain amount of time you will own the house. With this type of agreement, you will be given the opportunity to purchase the home after a set amount of time. The benefits of a rent-to-own are that it allows you to save money toward the purchase price, as well as improve your credit while you live in the house.
If you consider rent to own, make sure you review your finances and honestly map out how much time you think it will take to get your credit back in shape so that you can create a contract that works for you. This will put you in the best position to own the home at a later date.
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