Is renting to buy still an option?

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Sometimes the desire to own a home is so great that renters just can’t wait, even if they don’t have a down payment to buy a home. How do they do it? Through a contract with a seller called a lease-to-own agreement.
While it’s rare to see in a seller’s market when inventory is low, there are times when sellers will offer this arrangement. Basically, this is a delayed agreement to purchase the home in the future at a price that is fixed today.
How it works:
  • The amount of the rent is above the going-market rate.
  • Extra funds above the market rate will count towards the renter’s down payment in the future when the home is purchased.
  • Lenders typically still allow those above-market funds collected to count towards a down payment as long as everything is documented.

The biggest disadvantage to renting

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If you’re a Millennial—or have a son or daughter who is a Millennial—you’ve probably had a discussion about renting or buying a home. It can be a
hard question to answer, especially with the steadily-rising prices of houses.
However, there are clear disadvantages to renting:
  • Someone else controls all the rules, not you (such as whether you can have a pet).
  • You’ll see a steady increase in rent over time.
  • Zero tax advantages.
  • You have no say if your landlord wants to move into your place or sell to someone else.
The biggest disadvantage: You give away your money. Renting means you never will have the chance to build equity in a home. Instead, you give that opportunity to your landlord.