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Tired of paying rent and having nothing to show for it, but also not sure you could get a mortgage? A rent-to-own agreement is a kind of middle ground between renting and homebuying.

Let's take a closer look at rent-to-own, and whether it's right for you.

How does rent-to-own work?

concept housing a young family. Mother father and child in new house with a roof
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Rent-to-own might get your family into a home sooner.

When you and a homeowner work out a rent-to-own agreement — also known as a lease option, or lease-to-own — you pay monthly rent, but you also kick in some extra money each month to be put toward buying the house.

Those additional funds might eventually be used to make a down payment on the home, or to pay closing costs.

Use our calculator to find out how much house you can afford.

Rent-to-own: pros and cons

What are the advantages of rent-to-own?

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With rent-to-own, you can buy some time to work on your credit.

Breathing room: In general, you'll need a very good credit history to qualify for a mortgage loan. If you have poor credit or a very thin credit record, renting to own can buy you time to straighten out your finances.

Trial run: You get to live in the home before committing to purchase it. Which means if you change your mind when the rental term is up, you can walk away. You're not tied down by a mortgage!

Locked-in price: A rent-to-own contract includes an agreed-upon purchase price for the home. The owner cannot raise the price in the future, so you don't have to worry about ever facing a higher price — even if the market improves.

What are the disadvantages?

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You could lose your money to the landlord-owner.

Nonrefundable: If you decide you no longer wish to purchase the house, you have the right to void the contract. However, any money already paid toward the purchase of the house is lost.

Poorly regulated: Because rent-to-own contracts are less common than leases or purchase contracts, government rules often don't apply. You may find you have fewer protections in a dispute with a lender-homeowner.

Predatory owners: In some cases, the owner never intend on selling the property, and simply pocket money from the renter-buyer. The contracts may even include clauses allowing a short-notice eviction if a buyer misses a payment.