A rent-to-own option can lead to problems for you later on. The two biggest problems are:
1) What happens if for some reason, you are unable to obtain a mortgage and/or otherwise be in a position to be able to afford to purchase the home at the end of the contract? For example, what happens if you lose your job and don't have an income? What happens if you are the subject of a lawsuit? What happens if your credit scores drop because of late payments on credit accounts? What happens if you go into bankruptcy?
2) You enter enter a contract to purchase the house at an 'agreed upon' price. What happens in the value of the house drops say 10% and you can't afford to make up the difference between what the lender will let you borrow and the purchase price? And, what happens if the sellers stops paying his mortgage and subsequently goes into foreclosure? And, what happens if the sale of the house turns into a short sale and the lenders won't approve it?
Other considerations may arise. But, as you can see, rent-to-own is fraught with too many potential pitfalls that many sellers (and buyers) don't really want to enter into such arrangements.
You are actually better off renting until such time as you are ready and able to purchase a home.
I work with an associate who only does rent to own. 13 properties are owned and all are enrolled in these 'rent-to-own' programs. Each has been sold no less the 7 times. My associate never lost possession of any of them. These are incredible profit centers... unfortunately, they are structured to keep home buyers in a permanent renter status and much poorer in the end.
Each rent-to-own contract is written differently. One objective is to ensure the buyer does not attain an equitable interest in the property. These evasion tatics will be hard for you to detect. Often, you will need a great big pile of cash for the initial down payment. This money goes directly into 'Hip National Bank."
If a mountain of cash is not required up front, a bigger mountain will be required to execute the purchase. YOU the buyer will end up paying ALL fees. If you can't scrape together $15,000 for a down payment now, what makes you think you can have $30,000 when the time arrives to execute the purchase?
The moral to the story is, if you are unable to exercise the discipline to qualify for a traditional mortgage, this is not a short cut to ownership, it is a trap.
HOWEVER, if recent calamity has compelled the big banks to turn you down, but you are well qualified, this is, indeed, an option. You will still need a pile of cash upfront, but this situation will not be a trap. You will need the aid of an experienced professional or attorney to review these contracts. Your agent will be able to profile for you the properties that are most appropriate for those in your exact situation. Tread carefully.
ReMax Realtec Group
Palm Harbor, FL
727. 420. 4041
Talk to/work with a broker with investment experiences and you should be fine.