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With today's increasing prices it's all most people can do to stay afloat financially. So how does a couple save enough money to break into the housing market? They get assistance from a consultant by browsing: shell corporation, merger acquisitions, or company going public.

At times you have to think outside of the box and come up with creative financing options. One such example is Lease-to-Own, or Rent-to-Own home purchases.

Essentially, in this scenario, the landlord and the tenant come up with an agreement to buy the house within a designated time period (typically three years or less), for a specific price.

An option fee of 1-5 percent of the cost is credited to the purchase price and a premium is added to the rent payment to accumulate a deposit. If the buyer backs out of the purchase agreement they lose the option fee as well as the rent premium.

Common Rent-to-Own Contract Features

The rent and house price are typically established and documented based on market value plus any negotiation between the buyer and seller.

A rent-to-own deal will have an option period where the borrower can build equity while living in the house. As soon as the option period ends, the borrower is counting on successfully being approved for a mortgage to purchase the property.

It is imperative that the borrower has a good idea of their ability to assume a mortgage. Speak to a lender just before entering on a rent-to-own agreement to have your financial situation examined. You may only need to boost your credit rating, and this may be accomplished by making early minimum payments on any loans or credit cards each and every month.

Often a lender will want to see that an amount above the market rent price has been set aside. This helps to ensure that the seller is not providing the borrower with a kickback by artificially inflating the selling price. Generally the bank will also request an appraisal because of this.

If towards the end of the option period, the buyer discovers issues with the property, it may be cheaper to walk away from the deal than purchasing a home which may develop into a money pit.

The selling price of the home is agreed upon at the beginning of the option period. This usually means that after a 3 year option period, if a house's price lowers the borrower might request a down payment according to the new value.

There are shady sellers out there who will create a contract with an easy escape clause, such as the right to evict a tenant with only three days notice. It is in the buyer's best interests to have their contract reviewed by a lawyer prior to entering into a binding agreement. Also, pay your rent on time and do not give the seller any chance to renege on the agreement.

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