What Is Rent-to-Own?
A rent-to-own (also called lease-to-own or lease option) agreement allows you to rent a home with the option to purchase it at a later date, typically within 1-3 years. This can be an excellent path to homeownership for buyers who need time to improve their credit, save for a down payment, or establish employment history.
How Rent-to-Own Works in Pennsylvania
In a typical rent-to-own arrangement, you pay an option fee upfront (usually 1-5% of the purchase price) and a portion of your monthly rent is credited toward the eventual down payment. The purchase price may be set at the beginning or determined by an appraisal at the time of purchase. These programs are available in Philadelphia and throughout our service area.
Who Benefits From Rent-to-Own?
Rent-to-own programs are ideal for buyers who have a steady income but need time to improve their credit score, save for a larger down payment, or establish a work history after self-employment or a career change. They also work well for buyers who are new to the area and want to try a neighborhood before committing to a purchase.
Important Considerations
Rent-to-own agreements are legally binding contracts with specific terms and conditions. It is crucial to understand the option fee, rent credit structure, purchase price determination, and what happens if you decide not to buy. John Smart recommends working with an experienced real estate attorney to review any rent-to-own agreement before signing.
