You dream about buying a house, but you can’t — at least not yet. Maybe you don’t have the money for a down payment, or you’ve had problems with your credit. But what if someone offered you a chance to eventually own the house you’re renting?
You might be told it’s a chance to “stop throwing money away on rent.” But we’ve heard that many people who thought these deals were a path to owning a home watched their dreams disappear instead.
In a rent-to-own deal, the person or company that owns a home agrees to sell it to you in the future for a specific price. Rent you pay now is counted toward your future down payment on the house. But these deals can be risky — and even flat-out scams. Sometimes people find out:
- the “seller” doesn’t really own the property
- the owner hasn’t paid property taxes
- the house is in terrible shape, or has issues like lead or asbestos
- promised fixes aren’t made after a contract is signed
- the house is getting foreclosed on
Even with legitimate rent-to-own deals, the devil is in the details. You might have to pay upfront fees and higher monthly payments than if you were renting. In some deals, if you miss a payment, the deal is off. If you do make it to the end, you might find you’re locked into paying more than the home is now worth, or that you can’t qualify for a mortgage to finish paying off the house.
Consider saving up your money and working on repairing your credit to buy a house down the road. For more on buying home, take a look at our Homes and Mortgages articles.