Reports are out that the economy is improving, and some have even stated that the recession is officially over. Most also agree that it’s going to be a long recovery in the real estate market. Therefore, I have shared with you alternatives to traditional mortgages. During the past few weeks you’ve learned about Seller Carry Back, Land Contracts and Short Sales.

Another option that might help you purchase or sell a home during the economic recovery is Rent to Own (or Lease to Own). If you’ve purchased your new house, but can’t sell the “old” one, you might want to consider this alternative. Paying two mortgage payments can be difficult at best. Another scenario that could encourage a Rent to Own transaction is when you have a serious prospect who just can’t come up with the required down payment.

Quite simply, the renter pays an established amount each month to live in the house (just like renting). The difference is, a portion of each monthly payment is applied toward a down payment and the rest is income for the seller. At the end of a pre-determined period, the renter has the option to purchase the house. The money paid as part of the rent is applied to the down payment.

This benefits the buyer/renter by being able to purchase the home they want, while being given the time to accumulate the down payment. The term of the agreement also gives a trial period in the house before buying. This allows for the opportunity to “try it out” to see if there are any major expenses that will be required.

Conversely, during this agreement period, the buyer is responsible for all repairs and maintenance as though they had already purchased the house. On the financial side, a normal contract requires the buyer to pay an option fee at the beginning of the agreement, plus a penalty fee if late on the rent payment(s).

This Rent to Own option can lessen the risk to the owner, a great benefit. When compared to “just renting it,” the buyer normally takes much better care of the house because it is, in essence, his. If the renter does break the contract, the seller retains the option fee and the rent he has received as income.

Two major chances the seller takes are 1) if the buyer backs out, the selling or renting process begins all over again and 2) a buyer with the ability to purchase cannot buy the house because of the current agreement with the renter/buyer.

Though all transactions have an element of risk, these options can be the answer for a number of buyers and sellers. As I always suggest, discuss all options with a professional mortgage broker before making a decision. You might just find you have more than one alternative.