What’s the Catch with Rent to Own Homes? 7 Reasons to Beware of These Deals

Owning a home is many a renter’s dream. It’s a goal that can take years of scrimping and saving to squirrel away a down payment — not to mention the careful spending and meticulous bill-paying required to keep your credit score high.

In the meantime, you’re still paying rent, maybe even more each month than you’d pay for a mortgage payment. But what if a portion of your rent were going toward purchasing your rental home at a later date?

That’s exactly the dream that rent-to-own deals are selling, but what’s the catch with rent-to-own homes?

Rent-to-own basics: Crediting rent toward a future purchase

Also known as a lease-purchase agreement, a rent-to-own contract is an agreement between the tenant and the homeowner stipulating that a portion of the monthly rent is credited toward the future purchase of the property.

Then, when the lease ends — typically within 1 to 5 years — you’ve saved up a credit with the homeowner that effectively serves as your down payment.

Sounds ideal, right?

A rent-to-own deal means you can start paying toward a home purchase even if you can’t technically qualify for a mortgage yet.

“Most people considering a rent-to-own purchase either don’t have a high enough income or good enough credit to buy a house right now,” says experienced Washington state agent Hao Dang, who’s sold over 76% more single family properties in the Seattle area than the average agent.

But renting-to-own isn’t quite so cut-and-dried. There may be additional fees paid to the seller that will not count toward either your rent or your down payment, and you could also be on the hook for maintenance and repairs from the day you move in — but we’ll get into more of all that shortly.