how does a rent to buy program work?
In the typical “rent to buy” transaction the “buyer” pays an excessive rent, and a portion of that rent is applied to the downpayment upon purchase. If, at the end of the stipulated period of time between contract and purchase, the buyer can obtain financing, the transaction closes without additional downpayment being made. Now for the problems. Typically, the buyer cannot obtain financing for immediate purchase. Question: how will he obtain financing a year from them? Answer: he won’t. So at the end of the period he can’t close, the extra payment is forfeited, and the buyer finds a new place to live. Oh, yes, the “seller” pockets the excessive rent. Don’t do it. Today, many buyers are facing foreclosure because of a tanking real estate market. They got into this situation because they tried to buy too much house for their pocketbook, and the mortgage lenders were making loans the buyers can’t afford. Don’t join them.
