How Does Rent To Own Work in Houston?

How Does Rent To Own Work in Houston?

How does rent to own work in Houston? Past mistakes can haunt you when you begin your journey of homeownership. It is unfortunate that a missed medical bill or a tough couple of months financially can leave damage on your credit report. The former actually happened to us when we were preparing to buy our first house. Unfortunately, these type of things are all too common and can prevent banks from giving you a loan, or at least a decent rate on a loan. However, you are not out of options! One of the most common things people overlook when trying to buy a new house is using rent-to-own, or a lease agreement. Today we will discuss how to buy your home using rent to own in Houston.

Who Can Rent-To-Own Help?

Buying a house in Houston via a rent to own agreement can offer many benefits to buyers. It can also help people who want to buy but need some more time to prepare. Sure they could wait, but many times, people are ready to put down roots. They want to find a home for their families, without having to pick up and move again any time soon.

Using a rent to own contract can help people in a number of situations, finally, buy the home they have been dreaming of. The beauty of a rent to own agreement is that it provides you with the time you need to get yourself together, without having to live in yet another rental property.

1. If You Don’t Have Enough Money Saved Yet

Coming up with a down payment isn’t always easy. By the time you pay your rent, utilities, family expenses, and food bills, there isn’t always a lot left over to tuck away. That doesn’t mean you should have to wait for years to get into a home you love.

By using a rent to own contract for a Houston property, you’ll be able to settle into the house today, while having an extended period of time to save up for a down payment to a traditional lender and eventually buying the house outright.

2. Credit Problems That Prevent You From Getting A Loan

When you have bad credit, you aren’t going to have much luck qualifying for a loan. If you do qualify, you’re likely to be stuck with a much higher interest rate than people with better credit. With a rent to own agreement, you’ll be able to secure the property, pay a monthly fee, and officially close on the property at the end of your lease term.

Important Things To Know About Rent To Own

When you buy your dream home using a rent to own agreement, there are a few things you will want to prepare for.

1. Rent To Own Is Not Just A Rental

First, you should expect to pay a higher than average rent. This protects the seller’s interests and will make you less likely to default on the agreement. In many agreements, a portion of the increased rent will go toward the buyers down payment on the home.

The lease term is usually somewhere around 2-3 years, however, these numbers aren’t set in stone. The buyer and seller can make an agreement, with any duration they see fit.

Most agreements will require you to pay an option fee up front. This again protects the seller’s interests, secures the property, and gives you the option to buy the property at the end of the lease term.

2. Rent To Own IS NOT Seller Financing

The biggest difference between seller financing and a rent to own agreement is when the deed to the property will change hands.

With seller financing you are having the property put into your name and you are actually making the mortgage payment each month at the beginning.

With a rent to own agreement, the seller keeps the property in their name, but agrees that at a point in time the property will be sold to you.

What You Can Do During Rent To Own

1. Start Working On Your Credit

As I mentioned earlier, when we were checking out our credit report we realized that Savannah had a blemish on her credit. When we were in college, Savannah had to go to the emergency room for a kidney stone. She was in a lot of pain but ended up being fine. At some point, a medical bill was sent to her parents and unfortunately fell behind a desk. Eventually the bill went to collections, and finally got paid by her parents, but the damage was done.

This isn’t the end – there are things you can actually do fix it.

If it was a one time issue, there was an error, or some time has passed, you can try to have it removed. This is what we did, and in our case it worked. We wrote letters to the three credit bureaus (Equifax, Experian and TransUnion) and asked them to remove it. After a month or so they actually took it off of their report! These days you don’t even have to write the letters; you can instead use an electronic dispute function.

Use this time to repair your credit and prepare for the actual purchase. Work diligently on your credit and take advantage of free credit reporting tools. Also, check out this guide to help you get a plan for fixing your credit.

2. Get Some Savings

Start putting money aside every month. A down payment isn’t the only thing you will need money for when buying a house in Houston. Every homeowner knows that houses will require maintenance and repairs along the way. Before you officially become a homeowner, you’ll want to have a little money in the bank to cover incidentals.

If you are ready to become a homeowner in Houston but aren’t ready for a traditional mortgage, find out what a rent to own agreement can offer you!

Final Thoughts

One last thing to note is that sellers will also benefit from using rent to own. They will be more likely to find a buyer for their house, and get their asking price. Additionally, they are able to have a monthly income until they sell. A true win-win!

As always, If you are ready to sell your house fast, check out our company Brilliant Day Homes. We buy houses in Houston for cash.

In Case You Missed It – Check out our last article “Determine What Your House Is Worth In Houston”


Kevin is the co-owner of Brilliant Day Homes, and primary author of the Brilliant Day Blog. He grew up around real estate investing and spent summers working on rental properties for his dad, who runs a home renovation company with Kevin's brother. He enjoys spending time with his wife Savannah, and children Isaac and Amelia. He also has a passion for volunteering and usually spends several hours each week doing so.

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