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There are actually some advantages and disadvantages of which to be aware before agreeing to a contract.

Pros

Obligation

A main advantage to a homeowner deal is the ability to try something out with no real obligation toward it. Opposite to a home loan that can span 15 years, a rent-to-own agreement is usually for a period of one to three years. Therefore this allows the customer to check out the home and neighborhood and determine whether or not he really wants to keep it at the end of the contract. It should be noted, however, that in case an individual chooses to move away from that deal, he loses out on any specific rent-to-own payments -- as well as any down payment made -- created over the course of the signed contract.

Building Up Down Payments

Down payments are usually required by lenders to buy a property. This prerequisite prevents many individuals from making plans to purchase a residence. However, in a lease purchase situation, possible property owners are able make use of a portion of the rent payment towards the down payment. This provides interested consumers a possibility to save up an initial payment without actually having to live in the property.

Negative points

Security

Unlike a standard purchase or loan with bank, people that use rent-to-own contracts possess little to no protection if they are not able to render payments or fall behind. Almost all rent-to-own contracts particularly state that an individual can lose their property if they are unable to pay the rent. Not like a typical mortgage, individuals do not have the choice of refinancing or claiming challenges to be able to maintain the lease purchase agreement.

Loan Acceptance

Many individuals get involved in a rent-to-own contract until they are capable to be permitted for a loan with their own individual credit. While this is one advantage for some, those who still have a low credit score may find there are still unable to obtain traditional funding by the end of the signed contract period. In that instance, they may have to forfeit the home as well as the contract.

Real estate market Value Shifts

Fluctuations in home purchase price can be a big problem to a rent-to-own contract. When getting into a lease purchase situation, all involved parties agree on an arranged price for the purchase. The renter/buyer is required to make payments toward that acquisition costs throughout the contract, regardless of whether it has gone down in value. Take for instance, a couple may enter into a rent-to-own contract for a residence they will buy at the end of the 12 month period for $250, 000. At the end of the year, however, the home's market value has lowered right down to $200, 000. The couple will have already made payments for the whole year on the home based on the contract price and have to determine whether or not they want to continue paying for a residential property that is more expensive than it is currently worth.

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