Is Rent-to-Own or Contract-for-Deed Right for You?

Mortgage alternatives have potential benefits and complications, so be sure to read the fine print.

Young couple moving in new home
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Purchasers can also run into title issues. "From the tenant's perspective, the rent-to-own contract must prohibit the landlord from taking out a mortgage against the house during the tenancy," Ernsberger says. "The purchaser should also hire someone to do a title search to ensure the landlord actually owns the property."

Always have a knowledgeable attorney review a rent-to-own or contract-for-deed agreement before you sign anything. "Rent-to-own can be an advantageous transaction, but it depends how it's structured – like whether the renter is building equity through the rental payments," Zigas says.

Before purchasing through rent-to-own or contract-for-deed, buyers should also explore mortgage eligibility. "By and large, consumers will get the best terms, best rates and best protection by obtaining a home loan by a regulated bank institution," Zigas says. "You should shop around for home financing just like you'd shop around for a car loan. But at the moment, it is a marketplace that has a very narrow credit box, which means it can be hard to quality for a mortgage."