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RENT TO OWN  -  How does it work?

This is an alternative for buyers who otherwise wouldn't have the credit score or money saved to acquire their own home. Renting with an option to purchase a house helps buyers who can't afford a house today or who cannot qualify for a traditional mortgage. This lease-option gives typical renters the opportunity to purchase the house they are renting within a designated time frame, usually 3 years. 

Renters have to pay an option fee and then a rent premium. The option fee is a set amount that the renter pays the seller for the "right" to buy the property. If, at the end of the lease period, the renter buys the house, the option fee becomes part of the down payment. Rent premiums are an amount slightly above the typical rent, with a portion of that money going toward a down payment.

Here's a typical example: The house is worth $60,000, and typical rent would be $1,000 a month. Someone who's renting to own might pay $1,200 a month in rent and then receive a $200 rent credit each month. Add the option fee, in this case $5,000. On a three-year lease, the renter would earn $7,200 in rent credits. Adding the earned rental credits to the option fee, the renter has accumulated $12,200 for a down payment which will help them qualify for their mortgage.

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