Rent to Own Properties FAQ

A lot of people like you are not very familiar with Rent To Own programs and real estate overall, so we have created this FAQ page for to help you answer your questions.

Rent To Own is sometimes also referred to as a Lease Option, Rent To Buy, Lease To Buy, or lease with an option to buy agreement. It is not a traditional way to sell or buy a home but it is on the rise along with contracts for deed because lending regulations have tightened and current real estate markets made it difficult for sellers to sell their homes traditional way. It also became more difficult for people with less than perfect credit score to buy homes in MN. There are a lot of misconceptions and misunderstandings about rent to own programs and here we will try to break them down.

Rent To Own is sometimes also referred to as a Lease Option, Rent To Buy, Lease To Buy, or lease with an option to buy agreement. It is not a traditional way to sell or buy a home but it is on the rise along with contracts for deed because lending regulations have tightened and current real estate markets made it difficult for sellers to sell their homes traditional way. It also became more difficult for people with less than perfect credit score to buy homes in MN. There are a lot of misconceptions and misunderstandings about rent to own programs and here we will try to break them down.

What is Rent To Own and how does it work?

How is this different from renting an apartment or a home?

For example, let’s pretend that your monthly payment is $1,000 and your rental credits are 30% (this is negotiable between the seller and the buyer) of your monthly payments. This means that every month $300 is being applied towards your agreed purchasing price. This is about $3,600 per year that is being put back in your pocket!

Do I have to qualify to be able to Rent To Own?

Is the purchasing price of the home agreed before hand? YES. The future price that you will pay for the property you are leasing with an option to buy is negotiated at the time your Rent To Own Agreement is drafted and it is not affected by market conditions or any other fluctuations unless agreed otherwise. Keep in mind that your rental credits and a portion of your down payment could be applied towards final purchasing price of your home.

How long would a typical Rent To Own period last?

What to do I need for a Rent To Own program in MN?

What is an option fee?

In order for the seller to promise the buyer that the property will not be sold during a specified period of time, an option fee needs to be paid by the buyer. In most cases, it is a non-refundable fee that is paid at the beginning of the lease option period. If agreed, a part or all of option fee is usually applied towards purchasing price. It is not a rental deposit, so please don't confuse the two!

How much is the option fee (or down payment) for a typical Rent To Own in MN program?

Well, it usually depends on what a buyer and a seller agrees on but 5%-20% of the purchase price is a typical range to expect. It is negotiable. If you are a buyer, keep in mind that a higher down payment is more attractive to the seller. A higher down payment also means that your future purchase price will be lower. If you have a larger down payment, you can negotiate a lower monthly payment if your seller considers it.

What is a rental credit?

It is the portion of your monthly payment that is going to be applied towards lease option purchase price. It is to be negotiated between the buyer and the seller but it usually is below 50% of the monthly payment. It is a great reason to buy a rent to own home because you as a renter start building equity way before you even own the house!

What if I have a bad credit score?

No worries. Rent to own MN program is designed to help both the seller and the buyer. It helps buyers with bad credit scores and it helps sellers who are having troubles selling their home traditional way. Lease option period is usually enough for a buyer to build or repair credit in MN to be able to get a home mortgage.

What if my credit is still not good enough when it’s time to exercise the option?

Before you enter into a lease option agreement, make sure you talk to a loan officer who can give you a good understanding of how your credit score works and what it will look like 2-4 years from now. It would be very helpful to join a reputable credit repair program that will help you stay on track. It is a very good idea try to pay off all your old debt not to add any new debt during this period!

Who pays property taxes, mortgage, insurance, etc. during Rent To Own period?

Usually, the property owner is responsible for all of such payments until you buy his home. It is best to make sure that the owner is making payments and that’s why we exist to help you with it!

Can you help me with some financing? It depends on the situation, but yes. We can provide some down payment assistance, come up with seller carrybacks, etc. We highly discourage you from financing any Rent To Own related transactions, but it is possible. The bigger down payment you have – the smaller your monthly payment be and the smaller your purchasing price will be.