What we verified in “Rent-to-own homes: the risks and what to get in writing”

Statements and where we checked them

The statements with rules, figures or dates, with the exact place in the source and the date we checked them.

1. The New York State Department of Financial Services (DFS) urges caution before entering into any rent-to-own or other alternative home purchase agreement; it is investigating whether agreements such as rent-to-own, lease-to-own or land installment contracts constitute unlicensed, predatory mortgage lending; it says they are often marketed to financially distressed consumers, promising a path to homeownership but putting consumers at risk, and that they often do not lead to homeownership; and it warns that in New York they may violate laws on fair lending, mortgage protections, interest rates, habitability, property condition and disclosures.

   Sources 1 · Rent-To-Own and Land Installment Contracts: 'New Yorkers should use caution before entering into any rent-to-own or any other form of alternative home purchase finance agreement'; 'constitute unlicensed, predatory mortgage lending'; 'often are being marketed to financially distressed consumers, promising a path to homeownership, but putting consumers at risk'; 'that often do not lead to homeownership'; 'may violate New York laws and regulations regarding fair lending, mortgage protections, interest rates, habitability, property condition and/or real property disclosures' · Checked October 17, 2026

2. According to New York DFS, residential leases and mortgage agreements are required to provide basic consumer protections, but some companies claim to offer a hybrid agreement, part mortgage and part lease, that does not need to provide any of those protections; although it may look like a path to homeownership, it may impose harsh terms with little or no safeguards; and before signing you should consider whether a traditional lease is a better option.

   Sources 1 · 'Consider Your Options': 'Residential leases and mortgage agreements are required to provide basic consumer protections'; 'claim to offer a hybrid agreement - part mortgage, part lease - that does not need to provide any of the standard consumer protections'; 'these agreements may impose harsh terms with little or no safeguards'; 'you should carefully consider whether a traditional lease is a better option' · Checked October 17, 2026

3. According to New York DFS, rent-to-own companies tend to deal in severely distressed properties that have been vacant a long time and need substantial work; their agreements put all of the obligation and cost of repairs on the consumer, whereas New York law would put those obligations on the landlord; property tours are typically done with utilities off, so you cannot test whether basic services work; and some companies commission inspections that find problems such as black mold, termites or asbestos, but if you do not identify an issue, the company will not tell you.

   Sources 1 · 'Know Before You Sign': 'tend to deal in severely distressed properties - homes that have been vacant for a long time and often require a substantial amount of work'; 'Rent-to-own agreements impose all of the obligation to repair the properties, and the substantial cost of the repair work, on the consumer, whereas New York law would put such obligations on the landlord'; 'property tours are typically conducted when the utility services are not turned on'; 'black mold, termites, asbestos and other health and safety hazards'; 'And if you do not identify an issue, the company will not inform you' · Checked October 17, 2026

4. According to New York DFS, people living in a rent-to-own home may have legal rights, including if they fall behind; in New York, under the common-law doctrine of 'equitable mortgage', residents of single-family homes who make lease payments while improving the home accumulate equity over time, so the company cannot just evict them if they fall behind and they should be entitled to the protections of a foreclosure proceeding; if you received an eviction notice, DFS suggests speaking with a lawyer about an equitable mortgage defense.

   Sources 1 · 'Protect Your Rights - You May Be Entitled to Free Legal Counsel': 'you may have certain legal rights, including in the event of any payment default'; 'equitable mortgage'; 'residents in single-family homes making lease payments while improving the condition of the home, over time, accumulate equity in the home'; 'the company cannot just evict you if you fall behind on making payments'; 'you should be entitled to the protections of a foreclosure proceeding'; 'speak with a lawyer about an equitable mortgage defense' · Checked October 17, 2026

5. According to New York DFS, housing counselors who handle foreclosure-related issues can advise you on your options at little or no cost; New York's Homeowner Protection Program (HOPP) connects people with housing counselors and legal services at no cost at (855) 466-3456; and the HOPE NOW hotline offers free 24-hour help at 888-995-4673.

   Sources 1 · 'Get Help!': 'can give you advice on your options and resources at little or no cost'; 'Homeowner Protection Program (HOPP), which connects with housing counselors and legal services at no cost'; '(855) 466-3456'; '24-Hour assistance is available toll-free on the HOPE NOW hotline at 888-995-HOPE (888-995-4673)' · Checked October 17, 2026

6. According to the New York Attorney General's tenants' rights guide, anyone entering a rent-to-own agreement with a manufactured home park owner must get a contract that clearly describes the terms, all fees, rent and other charges over the contract, the home's fair market value and the park owner's responsibility for major repairs; every such contract must state that until title is transferred the tenant is occupying a rented home and that the park owner must keep it habitable; once a year the tenant is entitled to an itemized account of all payments; and if the park owner terminates the lease, the owner must pay back all payments made under the rent-to-own contract.

   Sources 2 · Residential Tenants' Rights Guide, 'Rent-to-Own-Protections': 'must be provided with a contract that clearly describes'; 'All fees, rent, or other charges due during the life of the contract'; 'The fair market value of the manufactured home'; 'The responsibility of the manufactured home park owner to cover major repairs and improvements during the rental period'; 'until the title to the property is transferred, the tenant is occupying a rented home'; 'keeping the home in habitable condition'; 'Once a year, rent to own tenants are entitled to an itemized account of all payments made in relation to the rent-to-own contract'; 'the owner must pay back all payments made pursuant to the rent-to-own contract' · Checked October 17, 2026

7. In Minnesota, the law on recording contracts for deed says a contract for deed does not include a lease, including a lease with an option to purchase.

   Sources 3 · Minnesota Statutes §507.235, subd. 1a(e): 'Contract for deed does not include'; 'an exercised option or a lease, including a lease with an option to purchase' · Checked October 17, 2026

8. According to the CFPB, in a contract for deed the seller keeps legal title until the buyer makes all the payments; it is a purchase on an installment plan rather than a traditional mortgage loan; and the buyer must act as the owner during the contract, typically paying the property taxes, insurance, repairs and maintenance.

   Sources 4 · What is a contract for deed? (last reviewed Sep 13, 2024): 'Contracts for deed are loans where the seller keeps the legal title of a home until the borrower makes all the payments'; 'a purchase made on an installment plan rather than through a traditional mortgage loan'; 'you must act as the property owner during the term of the contract, even though the deed is not yours yet'; 'property taxes, insurance, repairs, and maintenance are paid by the buyer' · Checked October 17, 2026

9. On an FHA loan, rent credits are the part of the rental payment that exceeds the appraiser's estimate of fair market rent; the lender may use the cumulative amount of those payments toward the Minimum Required Investment; and it must obtain the rent with option to purchase agreement, the appraiser's estimate of market rent and evidence that the payments were received.

   Sources 5 · HUD Handbook 4000.1 (last revised 8/12/2026), II.A.4.d.iii(T), Rent Credits (TOTAL): 'Rent Credits refer to the amount of the rental payment that exceeds the Appraiser's estimate of fair market rent'; 'The Mortgagee may use the cumulative amount of rental payments that exceeds the Appraiser's estimate of fair market rent toward the MRI'; 'the rent with option to purchase agreement, the Appraiser's estimate of market rent, and evidence of receipt of payments' · Checked October 17, 2026

10. On an FHA loan, the Minimum Required Investment (MRI) is the borrower's contribution in cash or its equivalent, of at least 3.5 percent of the property's Adjusted Value.

    Sources 5 · II.A.2.c.ii, Minimum Required Investment: 'refers to the Borrower's contribution in cash or its equivalent'; 'at least 3.5 percent of the Adjusted Value of the Property' · Checked October 17, 2026

11. For Fannie Mae, rent credit with an option to purchase is the portion of rental payments that can be credited toward the down payment under a documented rental or purchase agreement; it is the difference between the market rent, set by the appraiser in the appraisal, and the rent actually paid, and may be no more than that difference; the lender must obtain a copy of the rental/lease with option to purchase agreement showing an original term of at least 12 months, the total number of months, the monthly rent and the monthly rent credit; copies of canceled checks, bank statements, money order receipts or other reasonable evidence of the rental payments over the term, clearly showing the payee and the amount; and the appraisal showing the market rent.

    Sources 6 · Selling Guide B3-4.3-12, Rent-Related Credits (08/07/2024), 'Rent Credit with an Option to Purchase': 'the portion of rental payments (also referred to as lease payments) paid by the borrower that can be credited towards the down payment'; 'under a documented rental or purchase agreement'; 'determined by calculating the difference between the market rent and the actual rent paid by the borrower'; 'The market rent is determined by the appraiser in the appraisal'; 'the credit may be no more than the difference between the market rent and the actual rent paid'; 'an original term of at least 12 months, the total number of months of the agreement, the monthly rental amount, and the amount of the monthly rent credit'; 'canceled checks, bank statements, money order receipts'; 'The documentation must clearly indicate the payee and the amount being paid' · Checked October 17, 2026

12. The CFPB suggests gathering for your loan application, among other papers, your two most recent bank statements and documentation of the source of your down payment; warns that lenders may reject incomplete documents; and says requirements vary from lender to lender and depending on your situation.

    Sources 7 · Create a loan application packet: 'Bank statements, two most recent'; 'Documentation of the source of your down payment'; 'If your documents are incomplete, lenders may reject them'; 'Requirements vary from lender to lender and depending on your specific situation' · Checked October 17, 2026

13. HUD-approved housing counselors give independent advice on buying, renting, defaults and credit, often at little or no cost.

    Sources 8 · Find a Housing Counselor: 'Housing counselors throughout the country can provide advice on buying a home, renting, defaults, forbearances, foreclosures, and credit issues'; 'they can offer independent advice, often at little or no cost to you' · Checked October 17, 2026

14. According to LSC, it is an independent nonprofit established by Congress to fund civil legal aid for low-income Americans; on its site you enter an address or city to find the nearest LSC-funded legal aid organization, and at LawHelp.org you can look up information about your legal questions and find free legal forms.

    Sources 9 · I Need Legal Help: 'LSC is an independent nonprofit established by Congress in 1974 to provide financial support for civil legal aid to low-income Americans'; 'enter an address or city below to find an LSC-funded legal aid organization near you'; 'You can also visit LawHelp.org to look up information about your legal questions and find free legal forms' · Checked October 17, 2026