If you don't have enough money right now to make a down payment for a home, or your credit rating is too low to secure a loan, you may find a solution by entering into a rent-to-own contract with a home seller. Rent-to-own contracts can offer you some flexibility and time to improve your situation before buying a home.

The biggest advantage to renting-to-own a home is that it will give you time to save money for a down payment and to repair your credit rating. Under such contracts, a portion of the rent you pay each month is credited against the down payment. So the rental period of the contract not only gives you time to save money, but actually helps you pay down some of the initial costs of buying the home. However, do note that the contracts will usually not accept the rent payment as a credit if the rent is paid late that month. So make sure you pay your rent on time each month to take advantage of the down payment credit.

Another advantage to a rent-to-own contract is that the contract may provide some options that allow you to walk away from the property if you ultimately decide you don't want to buy. Buying a home is usually an American's biggest purchase and the commitment factor when buying outright can be a bit scary. A rent-to-own contract, depending on its terms, may allow you to void the purchase contract if you find something seriously wrong with the house. You'll likely lose the upfront option fee you paid to keep the option to buy while you rent, but that's just a small percentage of the total selling price. If the house really does turn out to be a dud, losing your option fee may be money well spent if it lets you avoid buying a house you don't want.