There's no denying that mortgage rates in today's day and age are among the highest they've ever been. While rates are predicted to drop slightly in 2025, affording a downpayment on a home remains unattainable for almost 20 percent of potential buyers in the U.S.
But the good news is that if you face affordability challenges, you have options, one of which is rent-to-own homes. If you want to become a Pittsburgh homeowner but need a helping hand, here's what to know about your rent-to-own options.
Rent-to-Own Homes: Here's How It Works
Rent-to-own gives you an option to work towards homeownership - it's one of the best ways to purchase a home you may already live in.
In most arrangements, you set aside a portion of your monthly rental payments towards the downpayment of the house. These monthly installments go towards the final purchase price of the home.
The purchase agreement includes how the price of the home is determined when you decide to purchase it. It also includes how your rent payments apply to the downpayment or purchase of the property.
Bear in mind that you will most likely need to pay an upfront fee if you want the purchase option included in your overall contract.
This fee typically ranges from one to five percent of the purchase price. This amount is held in escrow and goes toward your down payment on the home at a later stage.
Let's take a look at the two different types of rent-to-own contracts you can choose from:
1. The Lease-Option
You have the option of buying the property at a particular point in the future - usually at the end of the lease term. You will have to pay an option fee (as mentioned above) to have this included in your agreement.
In your lease agreement, you will find the stipulations on how your rent goes towards the purchase price of the home. However, you can negotiate the option amount and monthly rental payments before the lease agreement is drawn up.
Once your lease expires, you can work with the seller and come to an agreement on the purchase price. This option is perfect for potential buyers who aren't quite sure whether they want to buy a home, as they can just walk away from the agreement if they choose to.
However, you stand to lose your option fee and the rent credit if you choose to do so.
2. The Lease-Purchase
This option is quite similar in that a percentage of your rent payments go towards the home's downpayment. The key difference between the two is that you and the seller must agree on a purchase price ahead of time.
You can either choose to agree on the purchase price when you sign the lease. Or, opt for a specific date for a home appraisal and then agree on a purchase price.
But the most important difference between the two options is the fact that you are obligated to buy the home at the end of the lease contract.
Need Help Finding Your Ideal Home?
Whether you're searching for rent-to-own homes, need advice on the Pittsburgh housing market, or the lease-to-own process, The Burgh Property Management offers full-service real estate expertise. We aim to make your journey to homeownership easier by finding you the best property to suit your needs and budget.
Property management in Pittsburgh is our specialty. With our industry knowledge, experience, and focus on customer service, you can count on our team to find you the perfect fit. Learn more about our realty services today.
