How to Identify a Rent-to-Own Mortgage Scam

There are many rent-to-own mortgage programs that claim to be able to help you purchase a home. While some of these programs are legitimate, many of them are scams. In order to avoid being taken advantage of, here are the basics of how to identify a rent-to-own mortgage scam.

Unbelievable Claims

Many of these rent-to-own mortgage companies make unbelievable claims about the services that they can provide. They will say things like "own a home for $500 per month" or "guaranteed Approval." Whenever a company is claiming that they can approve you for the purchase of a home, without any regard to your personal credit history, this should throw up a red flag. Purchasing a home is a large financial commitment. When a lender is allowing you to borrow that amount of money, they are taking a big risk. If anyone says that they are willing to let you borrow the money without even looking at your credit history, there is a good chance that you are dealing with a scam.


When examining a rent-to-own company, you will want to pay special attention to the rent payments. With this type of program, you are going to rent a property for a certain amount time before you can purchase it. Most of the time, the rent payment includes a certain amount of money that is supposed to go to the purchase of the property. This has the tendency to increase the amount of your rent payment compared to the market. Even with this increase, many of these companies charge you more than market rent because they know that you want to purchase the home. For example, they might require you to pay $1000 per month. $250 of that is going to the purchase of a home while the remaining $750 is going towards rent. If other houses in your area rent for $500 or $600, the company is taking advantage of you. 

Excessive Interest Rates

Many of these programs prey on unsuspecting people that have bad credit histories. They get them to agree to loan terms that are not in the best interest of the borrower. When you are evaluating the terms of the loan, you want to make sure that the interest rate that they are offering is acceptable. While the interest rate should be a little bit higher than what you could get if you had good credit, it should not be excessive.

Background Check

You will also want to make sure that you check out the background of the rent-to-own company. Research the company history through the Better Business Bureau website and review the history of the company. If they have a lot of complaints against them from other customers, steer clear because the business practices of the company are probably not ethical or fair.