Renting a home with an option to buy can be a good way to accumulate a larger down payment while trying on the neighborhood and the house. In a slow-moving buyer’s market there are many homes that remain on the market while the seller moves into his or her new home. Some sellers, especially those who cannot handle paying two mortgage payments, will allow the home to be rented with an option to purchase the home at the end of a certain time period. The rental payment normally will at least cover the mortgage payment for the property, plus more.
In the rent with an option to buy agreement the seller agrees to credit a certain amount of the rental payments to the buyer as a down payment. If you are considering this as an option you must have a written agreement. In that agreement several terms must be spelled out, the monthly rent amount, how much of that monthly rent payment goes toward a down payment, how long the rental lasts before it turns into a purchase, and what happens if the buyer decides not to purchase the home. Most commonly if, at the end of the rental term, the buyer decides not to purchase the home then all the money credited to the down payment is not returned to the buyer.