Many Hoosiers dream of buying a home but may not have a good credit score or enough savings for a down payment to take a traditional loan. So, what if a landlord or a company offered the chance to eventually own the house you are renting? Be aware, while rent-to-own may be a feasible option, it is not always as sound as renting or buying a home. Rent-to-own deals may have more than one catch.
“Some companies may look to take advantage of individuals who don’t qualify for a traditional loan, but do not want to rent forever and want to achieve the American dream of homeownership,” Attorney General Todd Rokita said. “Our office is committed to making sure Hoosiers are aware and prepared to avoid unfair, abusive, or deceptive business practices.”
How rent to own works: You sign a lease contract that includes clauses with an option to buy, usually at the end of one to three years of leasing period. You will pay a premium on top of your monthly rent which does not count towards your down payment. A well-arranged rent to own deal provides time to build or repair your credit while you gain equity on your future home thus speeding the process to obtain ownership. However, be aware that usually you will still have to get a mortgage on the remaining balance when the lease ends.
Sometimes too late, the tenant/buyer finds out the “seller” doesn’t really own the property, property taxes have not been paid, the house has major issues, or the house is in process of foreclosure.
If you believe you are victim of unfair, abusive, or fraudulent business practices, please report your encounter to the Consumer Protection Division of Indiana Attorney General Todd Rokita’s Office, which works every day to safeguard the rights of Hoosiers. Visit www.IndianaConsumer.com for more information.
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