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Rent-to-Own

How Does Rent-to-Own Homes Work & Why Pathway is Best

Within the last decade, the rent-to-own model has grown to become more common among homeowners. This option allows tenants to pay their monthly rent and have it accrue toward their eventual down payment and purchase of the house they are currently renting.
Rent-to-Own

How Do Rent-to-Own Homes Work?

What is a rent to own home?

Within the last decade, the rent-to-own model has grown to become more common among homeowners. This option allows tenants to pay their monthly rent and have it accrue toward their eventual down payment and purchase of the house they are currently renting. 

How does rent-to-own work?

The rent-to-own approach gives the tenant the option to buy the house within a matter of a few years. The monthly payments with this option include the usual rent, along with any additional fees, all of which go toward the down payment for buying the home outright. Within the tenant’s contract should be stated: the monthly payments, how much each rental payment accrues toward the purchase of the home, and how much the final purchase price of the home will be.  

Buyer Perspective

Rent-to-own may be a good option for prospective homebuyers who can’t commit to a down payment or do not currently have a good credit score but plan to remain in the same area and eventually purchase a house. Renting first with the intention to purchase later may allow tenants to develop a better credit score. However, have an attorney check your contract or lease. There is no clear structure for writing rent-to-own contracts, and you want to clarify who is holding down payment funds, taxes, etc.  

Seller Perspective

The rent-to-own option can be a good approach for sellers if they have a house that has not seen much interest on the market for some time and for various reasons are struggling to find a buyer. As a landlord looking to sell your home with a rent-to-own option, you will want to have an attorney create a contract. One benefit to selling with a rent-to-own option includes having an agreed-upon, locked-in price for the future purchase of the house, without worry of changes in the housing market. Another benefit of rent-to-own, rather than simply leasing, is that you are more likely to have tenants who will take care of the home and property and will be more incentivized to value and respect the house.  

Pros of Rent-to-Own Homes 

For tenants who do not have enough financial capital, rent-to-own homes are a great way to save money toward a down payment and to see if they are able to afford the amount of house in the long run. Every month, a percentage of the rent will go toward the eventual purchase of the house, the amount of which varies from contract to contract. In general, the monthly payment is higher than market value, since the rent money goes into the down payment. Usually among rent-to-own contracts, the tenant and landlord split any repairs and other property responsibilities that may occur. Often the tenant agrees to cover the cost of smaller home repairs, while the landlord takes responsibility for the larger ones. This agreement is beneficial for tenants who want to buy the house but also do not have the finances to cover repairs and other emergency expenses. At the end of the contract, you can buy the house once you get a mortgage loan and begin the traditional home buying process. Whatever payments went toward the down payment will then pass on to your lender.

Cons of Rent-to-Own Homes

The downside to agreeing to a rent-to-own home option is if you end up deciding not to remain in the area or purchase the home, you won’t get any of that money back. It would be as if you were only renting the house, and at a higher rate at that. If at the end of your contract you are still unable to qualify for a loan, you would likely have to give up your right to the property. The seller would be able to rent it out to someone else or decide to sell it outright. 

Why Pathway is Better than Traditional Rent-to-Own Models 

With Pathway Homes, there is a new path to homeownership. If you know you are not ready for a mortgage today, Pathway Homes offers rent-to-own home programs to help you get there. Our programs offer a way for prospective homeowners to find their new home now, no matter what their financial situation might be. We are dedicated to working with our customers to find them the best deals that align with their financial and home buying goals. 

With our rent-to-own programs, we offer homeowners the ability to buy the home of their dreams with zero down payment and the flexibility to work with their particular financial situations. We created rent-to- own home programs to help new homeowners reach their goals and be able to afford their homes much sooner than other available options can afford.  

HomeStart program: This program requires zero down payment. The only thing customers have to pay is a security deposit. If anything happens with the house and/or appliances, we will cover maintenance and pay to have those things repaired. With this program, you can take the time you need to rent as long as you want, or to buy your home when you are ready.  

Savings Match program: With this program, customers put down a 2.5% savings deposit. Renew your lease or buy whenever you are ready. After a couple years of renting from us, we will then match the initial deposit should you choose to purchase a home with Pathway. The money invested in this program will work toward a down payment. 

A simple, no-committment process that gets you in a home, faster