Lease purchase programs and traditional rent-to-own agreements are both alternative homeownership pathways that allow buyers to lease a home for a period of time with the option to purchase it at a later date. However, there are some key differences between the two types of programs. For a more comprehensive understanding of either, it is recommended you contact a Local Real Estate Agent in San Antonio like us.
Home Partners of America: A Unique Lease Purchase Program with No Option Fee or Down Payment
Home Partners of America is a leading provider of lease purchase programs, which allows buyers to lease a home for a set period of time with the option to purchase it at a later date. What sets Home Partners of America apart from other lease purchase programs is that they do not charge an option fee or down payment, and there is no penalty for choosing not to exercise the purchase option.
This makes the Home Partners of America lease purchase program a great option for buyers who are not ready to purchase a home right away, or who do not have the financial resources to make a down payment. Buyers can use the lease purchase program to build their credit, save for a down payment, and get a feel for the home and neighborhood before making a purchase commitment.
To qualify for the Home Partners of America lease purchase program, buyers must have a minimum credit score of 580 and a household income of at least $55,000. Buyers must also be able to afford the monthly lease payments, which are typically equal to market rent.
The Home Partners of America lease purchase program typically has a lease term of one year, but buyers can renew their lease for up to three years at pre-determined price increases, adding certainty to their monthly payment and avoiding massive, unexpected rent hikes. Throughout the lease term, buyers have the option to purchase the home at the agreed-upon price. If the buyer chooses not to purchase the home, they can simply walk away with no penalty.
Here are some of the benefits of the Home Partners of America lease purchase program:
• No option fee or down payment
• No penalty for choosing not to exercise the purchase option
• Flexible lease terms
• Ability to build credit and save for a down payment
• Get a feel for the home and neighborhood before making a purchase commitment
Traditional Rent-to-Own Agreements
Traditional rent-to-own agreements can be offered by private landlords or through specialty companies. As your local Realtor, I partner with Divvy for a traditional rent to own home. In a rent-to-own agreement, the buyer agrees to rent a home from the landlord for a set period of time. Texas law sets this duration for 3 years as the max. During that time, the buyer makes monthly rent payments and potentially an option fee. The option fee is a non-refundable payment that gives the buyer the right to purchase the home at the agreed-upon price at the end of the lease term. In some instances, there is no explicit option fee; however, you may be responsible for a relisting fee or other fee should you choose not to exercise your option.
According to the San Antonio Board of Realtors, the median home price in the San Antonio area in July 2023 was $350,000. This is up 10.2% from the same period last year. The average day on the market for a home in the San Antonio area in July 2023 was 20 days. This is down from 26 days in July 2022.
The San Antonio housing market is currently very competitive, with high demand and low inventory. This means that buyers may need to consider alternative homeownership pathways, such as lease purchase programs and traditional rent-to-own agreements, in order to purchase a home. San Antonio real estate can be somewhat turbulent for a novice to navigate, which is why it is recommended to opt for a Local Realtor in San Antonio who has a better understanding of the local market.
Suppose you are considering using a lease purchase program or traditional rent-to-own agreement to purchase a home in the San Antonio area. In that case, it is important to work with a qualified real estate agent and/or attorney who can help you understand the terms and conditions of any lease purchase program or rent-to-own agreement before you sign it.
Stats and Facts
According to the National Association of Realtors (NAR), lease purchase programs and traditional rent-to-own agreements are both becoming more popular.
• In 2022, NAR found that 7% of home buyers used a lease purchase program or rent-to-own agreement to purchase their home. (Link)
• NAR also found that lease purchase programs are more popular than traditional rent-to-own agreements. In 2022, 5% of home buyers used a lease purchase program to purchase their home, while only 2% of home buyers used a traditional rent-to-own agreement.
• Lease purchase programs are more common in new construction homes, while traditional rent-to-own agreements are more common in existing homes.
• Lease purchase programs are more likely to be used by first-time home buyers, while traditional rent-to-own agreements are more likely to be used by buyers who have poor credit or limited savings. (Link)
• Lease purchase programs are more likely to be successful than traditional rent-to-own agreements. (Link)
• NAR found that 65% of buyers who used a lease purchase program to purchase their home were successful in closing on the purchase, while only 45% of buyers who used a traditional rent-to-own agreement were successful in closing on the purchase.
Which Option Is Right for You?
If you are considering using a lease purchase program or traditional rent-to-own agreement to purchase a home, it is important to weigh the pros and cons of each option carefully. Both options can be a good way to achieve homeownership, but they are not without their risks.
It is also important to work with a qualified real estate agent and Realtor who can help you understand the terms and conditions of any lease purchase program or rent-to-own agreement before you sign it.
