In a rent to own homes deal you make an arrangement to rent a home and then, after a period of time, you have the option to purchase the home before the lease expires. In most cases, you must also pay extra fees in addition to your rent payment to secure the ability to own that home in the future.

Although a rent to own situation can be beneficial to certain people if everything goes to plan, it can also end poorly. Some of the deals can be very risky or even complete scams. Because of this, it is very important to understand how the process works and what to watch out for.

Renting to own is a lot more complicated of an arrangement than simply renting a home, so you need to be well informed before you choose whether to do it. Also, it is crucial to understand that every rent to own contract is different, so you need to read the fine print and enlist the help of an attorney before you sign anything. Learn all the basics about these agreements by reading the sections below.

How a Rent to Own Agreement Works

To get started, you first look at rent to own homes listings to see what homes have the option to be part of this arrangement. When you find a seller or company that is interested, you enter into a rent to own contract with them.

In most cases, you commit to renting a property for a specified amount of time, with the option to purchase the home before the lease expires. This agreement includes a standard lease agreement in addition to the option to buy the property later on.

Typically, you will pay a higher rent amount than average as a percentage of the payment is applied to the purchase price of the home. This helps you by reducing the purchase price of the home, and sometimes even reducing the down payment you are responsible for.

You may also be responsible for paying nonrefundable upfront fees as well. These are usually called the option fees or option consideration. This fee allows you to buy the home in the future. The exact amount you must pay will vary, although it is typically between 2.5 percent and 7 percent of the purchase price.

Keep in mind that each rent to own house contract is different, so there may be other things that you are responsible for as well. For example, you may need to maintain the property and pay for all repairs yourself. It is crucial that you have the property appraised and inspected before entering into any agreement so that you aren’t stuck paying for massive damage you didn’t know was there.

Types of Rent to Own Contracts

There are a few different types of rent to own home contracts available, and some of them are more consumer-friendly than others. The two most common contracts are below.


A lease-option contract gives you the option to purchase the home after the lease ends. In most cases, if you choose for any reason that you don’t want to purchase the property at the close of your lease, you can and without any obligation to purchase the home or continue paying rent.


The lease-purchase option is much riskier. These arrangements can make you liable for purchasing the property at the end of your lease, even if you cannot afford it. Make sure that you watch out for these agreements and ensure that you have a real estate attorney look over all of the paperwork before you sign anything so that you know exactly what you are getting yourself into.

Why Renting to Own Can be Beneficial

Rent to own homes can help you to eventually become a homeowner, even if you aren’t financially ready when you first move into the home. There are a few different benefits to entering into this type of arrangement:

  • You have time to get financially ready to become a homeowner. You can save up for the down payment and improve your credit score.
  • You get to “lock-in” the home you want. If you find a home that you want to own, you can rent it until you are eventually able to purchase it.
  • You don’t have to move as often. Because you are renting the home you will own in the future, you just move into it and stay there through the entire process.
  • You can “test drive” the home before buying it. As long as you enter into a lease-option agreement, you can still back out once your lease is up if you decide you don’t like the area or the home as much as you thought you would.
  • You can build up equity even when renting. If the option fee and/or a percentage of your rent payment goes towards the purchase price of the home, you get to build up equity while you are renting.

How Rent to Own Home Programs Can be a Scam

As mentioned a few times already, if you decide to enter into a rent to own home contract it is crucial that you have a qualified real estate attorney read through all of the paperwork. Unfortunately, some of these situations can end up being complete scams. You may realize that:

  • The seller does not even own the property.
  • The property taxes have not been paid.
  • The home is entering foreclosure.
  • The home is in bad shape (faulty electrical wiring, an unstable foundation, lead or asbestos).

You need to keep in mind that when you enter into these contracts, you typically must pay higher rent each month than if you were simply renting. Also, if you miss a payment, some deals will be called off completely with no refunds.

Other Ways to Become a Homeowner

Instead of only looking for “Rent to own homes near me,” understand that there are other options as well. Consider looking into the various first-time home buyer grants in your area, as some programs offer extremely low-down payments and more flexible credit requirements.

If you have bad credit and cannot afford a down payment, perhaps consider simply renting a home and saving up a little bit each month. That way you build up your own savings account that can eventually be put towards a down payment. You can also work on your credit score while renting by paying off debt so that you can qualify for a house in the future.

Other Rent to Own Programs

Did you know that homes are not the only things you can rent to own? In fact, there are many different programs that allow you to rent to own furniture, electronics and more.

As one example, Aaron’s Rent to Own company allows you to make monthly payments on furniture, electronics and appliances. Then, once you have made all of your payments, you own the items completely. This is a great option if you need items for your home but cannot afford to buy everything upfront.