By Jennifer Srock

Rent to own can be very risky for a buyer. Especially in a market where home owners are losing their homes and tenants don’t find out until the bank comes knocking on the door.

The buyer begins the agreement as a renter who pays a fair market rent plus additional rent premium which gets credited to the purchase price. Typically, the buyer pays an option fee of about 1% to 5% of the purchase price which is credited to the final purchase price should the buyer be capable of buying at the end of the term. If the purchase option is not exercised due to any reason, the buyer usually loses both the option fee and the rent premium.

Most buyers have some sort of issues that cause them to go this route rather trying to qualify for a loan to purchase. A buyer still may not be able to buy the home for those same reasons they couldn’t buy at the start of the lease: bad credit, insufficient down payment, not enough income.

If you insist on a rent to own, I would recommend you find a realtor or even areal estate attorney that specializes in Lease Purchases and Lease Options. In my opinion, you may be better off speaking with a lender for advice on what is necessary for you to put yourself into a position to buy a home the conventional way in the future.