A rent-to-own contract, also known as lease/option, allows a renter the opportunity to purchase a property at the end of a lease period. A lease with an option to buy is good for buyers with these considerations:

• Saving for the down payment.
• Unsure if the neighborhood is the right choice.
• Trying to build higher credit scores.
• Uncertain job outlook; possible transfer.

A rent-to-own contract works like this:

• The buyer and seller agree on a nonrefundable option-to-purchase fee that the buyer will pay. The option fee gives the buyer the right to purchase the property in a certain time frame- usually one to three years from the initial lease date.
• Once an agreement has been reached, including monthly rent, terms of the deal, and purchase price of the house, the contract cannot be changed without the consent of both parties, even if the property increases of decreases in value.
• Once the buyers move in, they start to pay rent. But a certain percentage of the rent is usually credited to the down payment if the buyer does decide to purchase. According to Real estate columnist Ilyse Glink, thinkglink.com, the seller will typically rebate the buyer 25 to 40 percent of the rent to use on the down payment. Many sellers will even offer 100 percent of the rent.

For more information on rent-to-own mortgages, visit www.inman.com, www.thinkglink.com, or www.realestatejournal.com.

The author, Eddie Daroza, is a personal investor and stock market junkie. Besides contributing content to efinancedirectory, he works on the financial news show Rob Black and Your Money, broadcast daily on San Francisco's KRON 4. Eddie is also a reporter for PBS' Update News. He studies Business and Journalism at San Jose State University.