Making the decision to purchase a home can be one of life’s most exciting experiences. But, for buyers lacking the credit to secure home financing and a hefty 20% down payment-- the prospect of buying a home can seem impossible.

Rent-to-own (commonly referred to as rent-to-buy or a lease-option) is a sensible solution that allows credit- compromised buyers to get into great homes with little or no money down. Buyers pay a slightly higher market rent for their home with a portion of their monthly payments going towards the purchase price of their home. These "rent credits" accumulate anywhere between 1 to 3 years (the typical rent-to-buy contract period) and the money can then be used towards the down payment or total purchase price of their home. Rent-to-own provides the buyer with a golden opportunity to repair their credit so they can later qualify for a loan to finance the amount of the purchase price not met by rent credits. Rent-to-own contracts also give buyers an advantage: if at the end of the contract period the owner wants to walk away, they aren't legally required to buy the house. This can be a worthwhile option if the buyer discovers the property value of the home has decreased, or uncovers the necessity of expensive renovations and home improvements. Although the buyer would lose their invested rent credits, this minimal loss saves them in the long run. Conventional homebuyers--ones who invested hefty down payments--don't have the luxury to back out of their homes without taking monumental losses. That's one of the top reasons why rent-to-own users benefit from entering into these arrangements with private sellers.

Rent-to-own agreements are equally appealing to the seller. Homeowners benefit from selling their homes privately to rent-to-own buyers because of the nonexistent risk and unlimited financial gain. Most sellers utilize the rent-to-own option because they've recently purchased new homes and they're having a hard time selling the old one. This additional income allows them to offset their expenses--relieving them from the burden of paying two mortgages. Once the buyer is ready to commit to the contract, they can do so at the end of the contract period. Sellers have nothing to lose if a buyer decides to walk away without finalizing the sale of the home. The seller gets to keep the rent credits and any upfront fees collected. The seller, in turn, can re-enter into a new rent-to-own agreement collecting fees and rent credits from new buyers.