Updated February 02, 2022
Everything you need to know about Rent To Own [Program Review 2022]
Rent to own homes aka Lease Option, Lease To Own Homes, etc.
How does rent to own homes work? We’ll discuss it! But first, Let’s review some of the terms you’ve heard before:
- Lease option, Lease option purchase
- Lease purchase
- Lease to buy home, Lease to own, Lease to own homes, Lease to own program
- Lease with an option to buy, Lease with an option to buy contract, Lease with an option to purchase
- Lease with a right to purchase, Lease with a right to purchase program
- Rent purchase
- Rent to buy, Rent to buy homes, Rent to own, Rent to own home, Rent to own programs
All of these terms define a version of basically- move in now, buy later.
Hi, I’m Dana!
My name is Dana Ash-McGinty and I’m the Managing Broker of ASH MCGINTY & Co. I personally compiled this info to serve as a resource for you. I also lead our own Rent To Own aka Lease with a Right To Purchase Program. We’d love to work with you! Let’s connect if you want to get started and learn more about out program.
Here’s the Rent To Own Homes topics we will cover:
- Rent To Own Homes 101: A summary of a rent to own option, and points to consider when deciding whether this homeownership strategy is right for you.
- Treat a Rent To Own Home, Like a Purchase: Although there isn’t an obligation for a tenant/buyer to purchase the home, you should enter the Agreement as if you’re buying a home.
- Financing a Rent-to-Own Purchase
- The Lease Option Fee
- Important Lease Option Terms You Should Know: Key terms to include: Lease Option/Option Fee, Maintenance Clause/Obligations, Purchase Price, Rent Credit Reporting, and Term.
- Lease with a Right to Purchase Program FAQs
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Rent To Own Homes 101
A rent to own home, often called a lease with an option to purchase or lease option involves two agreements. It is important you are familiar with the various terms of these agreements.
Bee sure to sign BOTH agreements BEFORE moving into your rent to own home.
There are 2 agreements with any rent to own homes program.
Rent to own homes or a lease with an option to purchase involves two agreements:
- #1 Rental Agreement
- #2 Option Agreement (to purchase the property)
First, you should know, the rental agreement in most cases is the typical landlord and tenant agreement to rent the property at an agreed upon amount each month, for an agreed upon term. You probably have read and signed plenty of these. Pretty simple.
Secondly, the option agreement gives you (the tenant) a right to purchase the property for an agreed upon price and sometimes also within an agreed upon time frame.
There are several reasons rent to own homes may be an attractive way to buy a home.
Rent to own homes or lease options may appeal to people that may not yet have enough funds for a down payment and/or aren’t quite ready to qualify for a mortgage.
If you have a lower FICO credit score, this can be an opportunity to work to improve your score during the rental period. As you know, a higher FICO credit score will help you to get better mortgage rates and terms once you’re ready to buy.
Personally, I think the best feature of a rent to own program is that it gives you the opportunity to live in the home before committing to the purchase.
Of course, you don’t have to rent to own a home to accomplish homeownership.
If you are not quite ready to buy a home you could simply- rent a home in an area that interests you, save for a down payment, increase or repair your credit score (if necessary), and eventually seek to purchase a home in your area of interest.
But if you want to move-in your home TODAY, we can help. As a licensed real estate brokerage firm, we work institutional and private investors to provide legitimate rent to own programs.
Treat a Rent To Own Home, Like a Purchase
Before we look at the key terms, there is one very important consideration to keep in mind. You should treat a lease option property as if you are buying the home.
The Primary Goal Of Rent To Own Homes
The goal of a rent to own aka lease option purchase should be that you eventually buy the home. While intervening events may cause you not to exercise the option, you should approach the transaction as if you will.
So, what does this mean?
Choose a home wisely.
First, you should inspect the home as you would with a purchase. Look at the home as if you were going to sign a purchase agreement.
Second, look for a home you actually want to own. Only sign a rent to own contract or a lease purchase agreement if you can actually see yourself living in the home, even if it’s for a short period of time. If you imagine eventually converting the home to a rental property or selling at a later date, use rent to own as a strategy to acquire the property.
With our Lease with a Right to Purchase Program, you will work with a licensed REALTOR® to find a home. We assist you in making a strategic real estate decision.
In summary, a lease option can be a very reasonable path to homeownership. Particularly if you have some credit challenges and/or lack enough cash for a down payment. In those cases, a rent-to-own home may be a good option.
Having difficulty finding the home of your dreams?
With our Rent To Own/Lease Purchase Program, choose a home listed for sale on the MLS. First, you’ll rent your home. When you’re ready, you have the option to purchase (only if you decide it’s right for you)!
The Lease Option Fee
Here’s a few things to consider regarding the lease option fee before ever considering a rent-to-own contract.
- The amount of the option fee, typically about 1% of the purchase price (Our programs don’t require an option fee.)
- If there’s a lease option fee, is it refundable if you don’t purchase the property? (generally, no)
- If there’s a lease option fee, is it applied to the purchase of the home? (generally, yes)
I want to be sure you know that our programs don’t require a lease option fee.
Move in now, buy later
Important Rent To Own Homes and Lease Option Terms You Should Know
Lease Option Fee or Option Fee
Typically, this is a non-refundable, upfront payment which locks in the price of the home and ensures that the tenant has the first option (not obligation) to purchase the home on or before the agreed-upon date. (Our programs don’t require this fee.)
Maintenance Clause/Obligations
This determines who is responsible for which repairs. This is typically set by a dollar limit. For example, the tenant may be responsible for any repairs under $200. The property owner will then be responsible to make repairs for anything $200 and over.
However, local laws govern these limits to varying degrees, so contracts may look different.
Purchase Price
The rent to own contract will set a future fixed purchase price for the home.
Keep in mind, the seller needs an incentive to wait for a sale instead of selling now, so the future fixed price amount may be slightly higher than today’s market value.
No worries– most properties appreciate in value each year. This is why real estate is such a great investment.
Rent Reporting Credit
Additionally, your rental payment history can be included as part of your credit report and may be incorporated into your credit score. The inclusion of positive rental payments allows you to establish or build credit history through timely rental payments.
Term
Lastly, this is the time period for a rent to own contract or lease purchase agreement. It can stipulate any amount of time, but is typically 1-5 years.
In our programs, residents only commit to a 1-year lease term, but have the ability to renew their lease in one year increments up to five years.
The Ideal Rent-to-Own Homes Buyer
A rent to own contract could be an excellent option if you’re an aspiring homeowner but aren’t quite ready financially. These agreements give you time to get your finances in order, improve your credit score, and save money for a down payment while “locking in” the house you want to own.
Rent To Own Basics FAQs
What is rent to own homes? How does rent to own work?
First, rent to own is an agreement in which you commit to renting a property for a specific period of time, with the option of buying it. Standard rent to own agreements include a lease agreement and a detailed option to buy agreement.
Are rent to own homes real?
Yes, absolutely. You may be surprised, but there are thousands of first time home buyers (and even investors) purchase properties using a rent to own method.
Is rent to own homes a good idea?
There are lots of ways to acquire a property and one of them is through a rent to own agreement. This a good alternative to the traditional way of buying a house. However, you should be aware of the both the pros and cons.
– Test drive the property
– Lock in your purchase price
– Build purchasing equity
– Credit score flexible
– You may have to take on repairs
– There is no financing guarantee
Where can I find rent to own homes?
There are abundant rent to own opportunities. Unfortunately, there are those who would wish to take advantage of rent-to-own buyers. Be sure to find a home with a licensed real estate agent or broker.
Rent To Own Homes Maryland
Take a look at our Homeownership Program!
Lease with a Right to Purchase Program Basics
[The ultimate rent to own program!]
How does rent to own work?
If you want to own a home but cannot currently qualify for a mortgage, or if you would prefer to rent a home now with the goal of purchasing it later, then this program may be for you.
We partner with various institutional and corporate investors throughout the country to provide a clear and transparent path to homeownership.
Yes, we can help you find Rent To Own Homes in Maryland!
Finding a rent to own home
Firstly, there are qualifying homes currently available in multiple Maryland cities including: Gaithersburg, Germantown, Frederick, Laurel, Upper Marlboro, Baltimore, Temple Hills, Lanham, District Heights, and many more areas.
You will select the home that you want to live in from hundreds of eligible properties currently listed for sale on the local Realtor® MLS.
Our clients select a home of their choice, rent it and can purchase it anytime during the lease.
The rent to own home contract
There are two types of contracts in our rent-to-own agreement: the lease and the right to purchase agreement, also called the option agreement.
As with a standard lease agreement, you are only required to sign a lease for a year and make a security deposit. (Your initial lease is for one year, so your financial commitment is limited to the one year. Your lease is renewable.)
The option agreement gives you the right to buy the home at a pre-established price. However, you are not legally required to purchase the home.
The Basics
In a nutshell:
- Choose your own home currently listed for sale on the MLS
- Home price up to $450,000 (based on income)
- Quick Pre-approval
- Be in your home in approx. 45-60 days
- FREE in-house financial coaching
Qualifications:
- Minimum 580+ credit score (yes, you can use a co-applicant score)
- $45,000+ yearly income (yes, you can include co-applicant)
- 2 months rent deposit (not required until after you find a property; refundable if you decide not to purchase the property)
- No history of evictions or a pending bankruptcy
- You want to own a home in Maryland (Currently our program is only available in Maryland.)
Lease with a Right to Purchase Program FAQs
These are most frequently asked questions. Learn more about how rent to own works.
What is the Lease with a Right to Purchase Program?
Our Lease with a Right to Purchase Program allows you to find a home that you want to rent initially, but you also want to buy within the next 1-5 years. We believe that there are many households who may be thinking about buying a home but for whatever reason may need to or would like to rent at the current time.
How does the Lease with a Right To Purchase Program compare to renting?
Our program allows you to rent a home until you can get a mortgage to buy it. You can move into a home of your own and customize it from Day 1. You won’t have to move again when you transition to homeownership.
Who is eligible for the Lease with a Right to Purchase Program?
- Minimum 580+ credit score (yes, you can use a co-applicant score)
- $45,000+ yearly income (yes, you can include co-applicant)
- 2 months rent deposit (not required until after you find a property; refundable if you decide not to purchase the property)
- No history of evictions or a pending bankruptcy
- You want to own a home in Maryland (Currently our program is only available in Maryland.)
Are there rent to own homes near me?
Yes! There are currently homes on the market that will work with our lease to own and rent to own programs. With our program, ANY home currently listed on the market that fits the criteria below can qualify as a home you can rent to own.
Generally, this means that the home should be:
- Located in an approved community and is not adjacent to features that may negatively impair value
- Move-in ready, no “fixer-uppers”
- Listed for between $110,000 and $400,000/$450,000
- A single family home or fee-simple townhome (condos, commercial and multi-family properties are not eligible for this program)
- A traditional home sale (Short sales, auctions, and REOs are not eligible for this program.)
- Free from material deficiencies
- Preferably less than 30 years old, if older must be in good condition
How do I find a rent to own homes once I’m approved?
You will work with a REALTOR® with the ASH MCGINTY team to search for a home that meets your purchasing criteria. We will provide you with rent to own homes listings that meet the program criteria.
What documents are required for rent to own homes?
For traditional employment (hourly, salaried or commissioned), income is verified with the following items:
- Most recent tax return or W2
- 2 recent paystubs
- 2 most recent personal bank statements
For self-employment or contract employment, income is verified with the following items:
- Most recent tax return (1040 or 1099)
- 2 most recent corporate bank account statements and most recent K-1 showing percentage ownership (if applicable)
- 2 most recent personal bank statements
What if I had a bankruptcy or foreclosure?
- Chapter 7 Bankruptcy, you are eligible if you’ve been discharged at least 1 year ago.
- Chapter 13 Bankruptcy, you are eligible if it has been at least 1 year since the discharge date.
- Foreclosure, you are eligible if you are at least 2 years from the completion date.
How much money do you have to put down on a rent to own home?
Just a deposit that is equivalent of two months rent. For example- If your monthly rental amount is $1,750, you’re deposit would be $1,750 x 2 = $3,500. That’s a deposit of only $3,500!
How long is the application process?
The application only takes about 2 minutes to complete.
How long are pre-qualifications valid?
Pre-qualifications are valid for 30 days. If you’re not sure when you want to move, go ahead and apply today.
How long does it take from when I select a home to when I move in?
On average, it takes 30-45 days from the time we find your home. (The same amount of time as a typical home purchase.)
What happens after I move in?
You are the tenant and you have a landlord. However, you can purchase the home at any time during your lease.
How do I exercise my Right to Purchase?
You may notify us at any time that the lease is in effect that you would like to exercise your Right to Purchase.
Can I buy a home in the middle of a lease term or do I have to wait until the end of the year?
You can exercise your Right to Purchase at any time during your Lease.
Can I have pets in my home?
Yes! This is your home after all.
“The process was easy and simple. No catch. The mortgage is so much cheaper than rent! I wish I had done this earlier.”Robert M.
“The team was incredibly helpful. Thank you so much for allowing me to own my home in one year!”Cynthia F.
“I’ve been renting for 12 years and I never thought I could buy!”Antonio R.
Hi, I’m Dana!
I’m the Managing Broker of ASH MCGINTY and lead our Lease with a Right To Purchase Program. We’d love to work with you! Let’s connect if you want to get started and learn more about the program.
Rent To Own in Maryland /Washington, DC Metro area:
| Adamstown, MD | Montgomery Village, MD |
| Beltsville, MD | Morningside, MD |
| Bowie, MD | Mount Airy, MD |
| Chesapeake Beach, MD | New Market, MD |
| Clinton, MD | North Beach, MD |
| District Heights, MD | Olney, MD |
| Dunkirk, MD | Owings, MD |
| Frederick, MD | Oxon Hill, MD |
| Gaithersburg, MD | Rockville, MD |
| Germantown, MD | Silver Spring, MD |
| Hughesville, MD | Springdale, MD |
| Ijamsville, MD | Suitland, MD |
| Kensington, MD | Temple Hills, MD |
| Landover, MD | Upper Marlboro, MD |
| Lanham, MD | Waldorf, MD |
| La Plata, MD | Walkersville, MD |
| Laurel, MD | White Plains, MD |
| Middleton, MD | Woodsboro, MD |
| Monrovia, MD |
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Rent To Own Homes in Baltimore Metro area:
| Aberdeen, MD | Linthicum Heights, MD |
| Abingdon, MD | Lutherville Timonium, MD |
| Annapolis, MD | Mounty Airy, MD |
| Baldwin, MD | New Windsor, MD |
| Baltimore, MD | Nottingham, MD |
| Bel Air, MD | Odenton, MD |
| Belcamp, MD | Orchard Beach, MD |
| Chestnut Hill Cove, MD | Owings Mills, MD |
| Clearwater Beach, MD | Pasadena, MD |
| Cockeysville, MD | Parkville, MD |
| Columbia, MD | Perry Hall, MD |
| Crofton, MD | Pikesville, MD |
| Davidsonville, MD | Randallstown, MD |
| Edgewater, MD | Reisterstown, MD |
| Eldersburg, MD | Severn, MD |
| Elkridge, MD | Severna Park, MD |
| Ellicott City, MD | Stoney Beach, MD |
| Forest Hill, MD | Sykesville, MD |
| Gambrills, MD | Towson, MD |
| Glen Burnie, MD | White Marsh, MD |
| Hanover, MD | Windsor Mill, MD |
| Idlewylde, MD | |
| Jessup, MD | |
| Laurel, MD |
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For more info on Rent To Own Homes and our Lease with a Right to Purchase Program
Want more details? Great– we are super excited to share this innovative homeownership program with you!
- Minimum 580+ credit score (yes, you can use a co-applicant score)
- $45,000+ yearly income (yes, you can include co-applicant)
- 2 months rent deposit (not required until after you find a property; refundable if you decide not to purchase the property)
- No history of evictions or a pending bankruptcy
- You want to own a home in Maryland (Currently our program is only available in Maryland.)
Send me the details!
Dana Ash-McGinty
Dana is married to the highly esteemed Dr. Dana W. McGinty, a Washington, DC internal medicine physician and medical correspondent. They are often referred to as “The Danas”.
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