Lease to Own Homes Can Cost You More Than You Think
Many folks dream of buying a house but cannot qualify for a loan. Some turn to lease to own because they think it is the only way for them to buy a house. The tragedy is that most people who do lease to own end not being able to buy the house and they lose all their savings in the process.
The Truth About Lease to Own
Lease to own usually works like this:
You find a landlord who is willing to do lease to own. Why would someone be willing to do lease to own rather than just sell the house? Because they know they can make a lot of money doing it. Your money!
In order to move in, you pay a large down payment. In many cases people pay their life savings.
Since you are doing lease to own, you pay a monthly rent payment that includes extra money on top what your rent would normally be. That money is saved in a fund that will be used for your down payment IF YOU BUY THE HOUSE. If you don’t buy the house, you lose that money.
Your lease to own contract has an expiration date and you must purchase the house before that date. If you don’t buy the house before that date, you lose your down payment money and the extra money you paid every month in addition to your rent.
Most people lease to own because they can’t qualify for a house. Usually when it comes time to purchase a lease to own house, they still can’t qualify. So they lose their savings and are in a worse position than when they started. Imagine how terrible it must feel to have to move out of a house that you thought you would own and move into a worse neighborhood.
Even if you can qualify to buy the house, most people agreed to way too high of an option price. An option price is the amount that you agreed to buy the house for when you signed your lease to own contract. Since the option price is usually way more than the house is worth, it doesn’t make any sense to buy the house. The person either loses their down payment or buys a house for way too much. Its a lose-lose situation. This has especially been a problem recently as dropping home values have made this problem even worse.
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