What is Rent-to-Own Housing?

In real estate, the term rent-to-own (RTO) typically refers to an innovative homeownership solution, wherein a potential homebuyer enters into a lease-purchase agreement.  The process usually consists of four main parts:

1. Finding and moving into a home today.
2. Renting for a predetermined period of time (typically 36 to 48 months).
3. Strengthening credit and finances to qualify for a mortgage.
4. Purchasing the home at the end of the contract for a predetermined amount.

Rent-to-own agreements are designed to help get people get into homeownership sooner by offering an alternative financing solution. Someone who is struggling to qualify for a mortgage can enter into a lease-purchase contract with a trusted rent-to-own company, like JAAG Properties, enabling them to move into their future home today. [*]

Potential homeowners have the option to enter into a rent-to-own lease agreement for a set period of time (typically 36 to 48 months), with the option to purchase the home at the end for a predetermined price — (The final purchase price is agreed upon at the beginning of the contract. And the house will be sold at the agreed upon price, regardless of fluctuations in the market by the end of the deal). [*]

During the lease period of the rent-to-own contract, the “tenant” is required to make monthly payments. A portion of the monthly payment is credited towards the future down payment on the home, while the remainder is collected as monthly rental fees. [*]

Potential homeowners are expected to use the lease period of the rent-to-own contract to improve their chances to qualify for a mortgage at the end of the agreement. This could mean working with credit teams to improve finances and address credit issues. [*]

A successful rent-to-own contract results in the tenant having enough funds for the down payment, getting approved for a mortgage, and purchasing the home at the end of the predetermined time period. [*]