To purchase a home with traditional financing there are many hoops buyers need to jump through to qualify for financing from a bank. A credit check is performed, income verification done, bank statements checked, tax returns provided, pay stubs collected, and so on. This is to ensure the buyer purchasing the home will be able to make the monthly payments but what if the buyer fails to qualify? What can they do but wait while they work to make improvements in the deficient areas. This is where rent to own homes in Miami, FL become valuable.
Rent to own homes often require an upfront payment referred to as an “option fee”. This is a percentage normally 3-10% of the agreed to purchase price. On a $150,000 house with a 5% option fee that would be $7500. It is also customary that a portion of each monthly payment the buyer makes to the seller goes toward the purchase of the home. This portion going toward the purchase price is also referred to as option payment. This is normally 10-20% and is negotiated between the buyer and the seller.
When the buyer is ready to purchase the home, this option payment made by the buyer are credited to the purchase price of the home. If the buyer decides to not purchase the home, all of the option money that was to be credited to the buyer stays with the seller. Option fees are sort of like an investment made by the buyer. If they decide not to purchase the property, they lose all of the option fee money they put into the rent to own purchase. The seller would get the home back and any option money paid up front and any option money paid with the monthly payments stays with the seller. No money is returned to the buyer.
From there, the seller could put the house back on the market for a traditional sale or collect another option fee down payment and try again with a new buyer, or become a landlord with a straight rental. To encourage on time payments the option fee that was to be credited with each monthly payment is only credited with on time monthly payments. Just because of a late payment the buyer does not get a reduction in rent since they will not receive credit. The full monthly payment is due, but with the penalty of not receiving the monthly option credit.
In today’s market, rent to own homes can be great ways for someone to own a home, when they have some negative forces working against them. They may have less than perfect credit, or may not need a large down payment. While it isn’t recommended, the buyer has an easy escape and could stop paying at any time and find somewhere else to live should they not find that location suitable or their lifestyle changes.
I personally recommend that you consider purchasing a home that you have the means to pay for instead of rent to own homes in Miami, FL. Fortunately, we do have a list of properties that gets updated whenever possible. You can take a look at them to determine if they suit your taste and your budget.