Rent to own a house is also called lease to own house (or a whole slew of other phrases… like “lease option”, etc.).
So how does rent to own homes work in St Louis and other parts os MO?
How Does A Rent To Own Home Agreement Work?
It is kind of similar to a car lease.
In this kind of arrangement, the renter rents a house from the owner of the house and pays monthly rental fees for living in the house. After a given period of time, usually three years or so, the renter can decide to purchase the house at a price that the renter and owner of the house agreed upon at the start of the rent to own agreement.
Of the monthly rent paid to the owner, a fraction can sometimes go towards down payment of the house depending on the local laws and guidelines. Sometimes applying part of the monthly rent to the purchase price is now against the law because of a law passed by Congress called the Dodd Frank Law.
The Rent To Own Contract Agreement – How It Works Here In St Louis
The contract the buyer and seller draw up should be very clear. You should understand the nature and terms of the contract properly before signing it. Make sure you ask the seller lots of questions if you’re not clear about anything at all.
This arrangement has got advantages for both sellers and buyers alike… but also some huge benefits. So understand both the pros and cons so you can make a great decision for you and your family.
The Financial Parts Of The Rent To Own Agreement
First, the seller has to set the purchase price and monthly rent for the house.
The Monthly Rent
The purchase price is usually retail value for the house in today’s market. The monthly rent is usually a bit higher with a rent to own / lease option agreement than if you were to just rent a house normally.
Because you’re paying for the ability to purchase that house at the end of the agreement and you’re locking that house down so others can’t purchase or rent it during the entire term of the agreement.
The Purchase Price
The agreed and signed price and rent is settled and locked during the entire rental period of time, which is usually between one and three years.
The agreed price doesn’t change during the agreement based on market prices in St Louis, whether they rise or fall. That’s one of the big benefits of buying a house here in St Louis with a rent to own… that you can lock in to buy a house at a price today… and not have to buy the house for 1 – 3 years… and that purchase price won’t go up over those years.
The Option Fee / Upfront Payment
There is an option fee that the buyer pays the seller. It is a set amount of money payable to the seller by the buyer before you move into the house. This amount can really vary based on who you’re working with and the house price… but a rule of thumb is usually 1-5% of the total house purchase price is what you can expect to pay upfront to enter the agreement… and this payment is usually non-refundable if you decide to NOT buy the house at the end of the agreement.
This option of buying a house in St Louis with a rent to own agreement is very good for buyers who would otherwise be unable to purchase a house or whose credit score wouldn’t meet the required threshold for a mortgage.
For sellers like us, the rent to own opens up the potential “buyers pool” so we can help more people get into great homes.
For buyers, it lets you work toward home ownership and have that sense of pride you feel when you own a home.
The End Of The Rent To Own Agreement… What Happens?
Of course the idea of getting into a rent to own home in St Louis MO is that during the rental term… you improve your credit and financial stability so you can get a normal home loan at a bank.
So during that whole period… you should be really working to improve your credit… save up money… and work with a local St Louis mortgage broker or bank to get pre-qualified BEFORE the rent to own agreement expires.
At the end of the rental period, you as the tenant / buyer have the choice to either buy the house at the price in the agreement… or you can walk away and not buy the house just like a normal rental house.
If you choose not to buy the house, no biggie at all. You can move out of the house and onto another house… or under special circumstances you may be able to update the rent to own agreement to give you a bit more time to get qualified for a bank loan to buy the house.
With our local St Louis Rent To Own Program our ultimate goal is to help you reach your goal of home ownership. So we can be flexible often times if you need an extra few months to get things lined up financially and with the bank to close on the house.
Just like in any other way of buying a house in St Louis, there are mutual pros and cons for both the buyer and seller.
So just do your research… keep browsing this website and check out our Frequently Asked Questions page… or give us a call anytime at 314-433-3014 or shoot us an email on our Contact page to chat with us and our local rent to own program.
Last… have you found the St Louis rent to own house that’s perfect for you yet? If not, join our Early Property Alert List below to get email alerts quickly when we have new rent to own houses in the St Louis MO area available.