How Does The Rent To Own Process Work For Buying A House in Connecticut

1. Lease Agreement

You sign a lease agreement with the property owner, which usually spans from one to three years. This lease agreement includes a rental period, during which you live in the house and pay rent like a traditional tenant.

2. Option to Purchase

Alongside the lease, you sign an option agreement granting you the right to purchase the property after or during the rental period. This option usually requires a non-refundable fee called the "option fee" or "option money," which is typically between 1% to 5% of the purchase price.

3. Rent Payments

A portion of your monthly rent might be designated as rent credits, which accumulate and can be applied toward the down payment when you decide to buy the house. For example, if your rent is $1,200 per month, $200 of that might go toward your future down payment.

4. Exercise the Purchase Option

At any point during the lease term or at the end of the term, you can choose to exercise your option to purchase the property. You’ll need to secure a mortgage or other financing to buy the house. The price may be fixed based on the original agreement, or it may depend on the market value at the time of purchase.

5. Purchase the Home

If you decide to buy, the option money and any rent credits you've accumulated are applied toward the purchase price or down payment. You'll go through the standard home-buying process, which includes securing a mortgage, getting a home inspection, and closing the deal.

What to Watch Out For

• Negotiating Terms: Ensure you clearly understand the terms of both the lease and purchase option agreements. Consider having a real estate attorney review the contracts.

• Repairs and Maintenance: Determine who is responsible for maintenance and repairs during the rental period.

• Market Conditions: Be aware of market conditions as they can influence whether the agreed-upon purchase price is favorable by the end of the lease period.

By choosing the rent-to-own route, you get the chance to live in your future home while working towards buying it. It can bridge the gap for those who need time to save more or boost their financial standing before making the big commitment. If you're considering rent-to-own, it's important to fully understand the terms and to seek professional advice to ensure you’re making a smart decision.