We receive a lot of calls into our office from folks interested in lease option homes. One of the first questions asked by potential tenant buyers of our local Pittsburgh PA rent to own homes / lease option homes is “how do rent to own homes work in Pittsburgh?”
With a flooded real estate market, especially since the bubble burst of the mid-2000’s, rent-to-own homes have become an increasingly popular option for people who are deciding whether to purchase or rent a home.
Renting to own offers opportunity advantages to both buyers and sellers.
For the tenant buyer, they typically have a steady job and are able to maintain their income to make consistent and consecutive mortgage payments, each month, throughout the lease agreement portion of the lease option term, normally two, three or even up to five years. The seller/landlord enjoys the consistent cash flow of those steady monthly payments being made from the buyer through the lease term period. After the two to five year term of payments are made consecutively by the tenant buyer, the tenant/buyer has established good-faith with the landlord/seller and typically will offer to originate a new mortgage for the purchase of the home by the tenant/buyer, so they can own the home.
This scenario creates a win-win solution for all parties. The tenant buyer established credit through the lease period term and places themselves in a position to qualify for financing directly from the landlord/seller. With a rent to own lease option, the landlord becomes the bank, originates a new loan for the tenant, and creates a path for the tenant buyer towards home ownership! Wow!
How Does the Rent To Own Process Work?
Renting a home to own a home is a relatively straightforward process; however, a lot of people get confused trying to overthink the process.
A common misconception is the lease term portion of the lease agreement. Many tenant buyers think the lease term is 15, 20, or even 30 years before they own the home. This is not the case, but it is important to understand the basic elements of the lease option agreement before you approve this document.
What are the Basic Elements of a Lease Option or Rent to Own Purchase Agreement?
• The tenant buyer and seller landlord customize a lease with an option to buy agreement, and clearly go over all of the agreed upon terms of the rent-to-own agreement.
• The agreement will clearly outline the down payment (%5 of the purchase price, or/up to $20,000), monthly rent, and term period of the lease component.
• The tenant buyer will have the option to purchase the home at an agreed upon price at the expiration of the lease agreement term period.
The basic structuring of the rent to own lease option agreement provides flexibility for the potential tenant buyer, and offers a period of time for the tenant buyer to get their finances in order, while the landlord seller continues to make the mortgage payment on the home, or continue to pay the taxes if the home is owned outright by the seller. This scenario is beneficial to the tenant buyer because they can make their own updates and customize the home however they like, because they intend to acquire financing to purchase the home at the end of the lease term, and have a goal to do just that! Rent to own tenant buyers are making consistent payments throughout the lease term for the purpose of obtaining or qualifying for a loan to buy the home at the end of the lease term. Tenants can begin customizing the home to meet their needs and preferences, the day they move in… essentially treating it like their own home, and having that sense of home ownership during the process.
The end goal for all rent to own tenant buyers is to build credit throughout the lease term, make consistent and on time payments and position themselves to qualify for the purchase of the home at the end of the term.
How Does The Monthly Rent Work With A Pittsburgh Rent To Own House?
This depends on the location and value of the home (state laws dictate the rules across different states) and any existing guidelines or newly legislated federal guidelines permit. Seller landlord guidelines vary across states, but most are similar to some extent.
Standard guidelines of a rent to own lease option property:
- You agree on a rental rate, down payment and a set purchase price to be paid for the house at the end of the rental lease term, which is normally 1-2, 3 or up to 5 years in some cases.
- You first pay an upfront down payment to move in and secure the agreement and the terms with the option to buy. The “option fee” or “move in amount” may in some cases act as a percentage of the down payment on the home, should the renter decide to purchase at the end of the term. This may or may not be the case depending on when and where you are reading the article (based on laws). Connect with us directly for the local Pittsburgh PA Rent to Own laws.
- You pay the monthly rent payment. This is no different from paying rent in any normal rental situation.
- At the end of the rent to own agreement (usually 1 – 3 years) you decide if you want to purchase the home for the price you agreed on initially in your rent to own agreement. If you want to buy the home, great! We can assist in getting you qualified for a conventional loan to buy the home. If you chose you do not want to buy the home, you option not to! It is that simple. You are not required to buy the home at the end of a rent to own agreement in Pittsburgh… the choice is fully yours. This is why the agreement is called a “lease with an OPTION to buy.”
So, for the question of “how do rent to own homes work in Pittsburgh“… well that is the basic process.
While there are lots of benefits of renting to own a home here locally… every housing option has pros and cons.
Just do your research, talk with reputable and experienced companies like Pittsburgh Cash Home Buyers LLC who can walk you through the local Pittsburgh rent to own house process… and make the smart financial decision for you and your family.
Many people choosing rent-to-own may have past credit problems, or may just be unsure if purchasing a home is right for them. If that is you and you want to look into the rent to own process and see some of the available rent to own / lease option houses here in Pittsburgh PA, click the link below and fill out your basic info to get on our Pittsburgh rent to own home list.
In this era of uncertainty within the real estate markets across the country, many Americans are finding that rent-to-own homes provide both flexibility, and the option to purchase a property at the end of the term. Understanding how rent-to-own homes work can position your to take advantage of the many benefits of renting to own, and realize the American dream, despite prior credit challenges or hardship situations. We are here to help and answer questions! Please reach out to our team for additional information or assistance at any time.
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