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Rent to Own

A rent-to-own mortgage, also known as a lease-to-own mortgage, is a type of financing arrangement in which a borrower makes monthly payments that include both rent and a portion of the down payment on a home. The borrower may have the option to purchase the home at the end of the lease period, typically after making a certain number of payments.

In a rent-to-own mortgage, the borrower typically does not have the option to obtain a traditional mortgage until the end of the lease period. Instead, the borrower agrees to pay a higher than market rent in exchange for the opportunity to build equity in the home and eventually purchase it.

There are a few key things to consider if you are considering a rent-to-own mortgage:

Credit requirements: Rent-to-own mortgages may be available to borrowers who do not qualify for traditional mortgages due to low credit scores or lack of a down payment. However, the borrower may still need to meet certain credit requirements to qualify.

Lease terms: It's important to carefully review the terms of the lease, including the length of the lease period, the monthly payment amount, and any conditions that must be met in order to purchase the home.

Future home price: It's also important to consider the potential future value of the home and whether it is likely to appreciate in value over the lease period. If the home is not likely to appreciate significantly, it may not make financial sense to pursue a rent-to-own mortgage.

Risk of default: If the borrower is unable to make the monthly payments or otherwise defaults on the lease, they may lose the opportunity to purchase the home and could be evicted.

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