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

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."