Is Buying in Your Future? Down Payment Assistance Programs vs. Rent-to-Own

While the idea of rent-to-own seems reasonable, in practice such arrangements may not be in a buyer's best interest. In fact, the Federal Trade Commission cautions against rent-to-own deals, mostly because of the risks involved and the very real potential for scams.

'No credit? No problem!' — usually too good to be true

Typically, renters pursue rent-to-own arrangements because they have poor credit or don’t have money for a down payment. (The down payment is money you pay upfront toward the purchase of a home. The rest of the home’s purchase price is covered by a home loan called a mortgage.)

The FTC says that renters can lose money on rent-to-own agreements that could instead have been saved for a down payment; it recommends you wait until you’ve saved and improved your credit.

Down payment assistance programs are worth a look

If you’re thinking about rent-to-own because you lack funds for a down payment, you can apply for down payment assistance through one of the 2,000-plus programs offered throughout the country.

Down payment assistance programs are typically run by state and local governments and nonprofit community groups. They’re designed for households who can afford monthly mortgage payments but don’t have enough money to put down toward the purchase.

The U.S. Department of Housing and Urban Development has a state-by-state list of programs that provide assistance in buying homes. A real estate agent or mortgage lender may know about additional programs in your state or local area.

Zillow also can help you find creative ways to save up.