🏡 Rent-to-Own Homes in Tennessee: What You Need to Know Before You Sign
- willbaugher
- Jul 31
- 3 min read
Thinking about buying a home but not quite ready for a mortgage? Rent-to-own might be the perfect path for you. Here's how it works—and what to watch out for in Tennessee.
What Is Rent-to-Own?
Rent-to-own is a way to buy a home over time. Instead of getting a mortgage right away, you rent the home first. A part of your rent might go toward the purchase price. Later, you can buy the home using a loan—or sometimes without one.
This is a great option if you:
Have low credit
Need time to save for a down payment
Just moved and want to try out the neighborhood
In Tennessee, rent-to-own is becoming more popular because it gives buyers more time and flexibility.
Types of Rent-to-Own Agreements
There are two main types of rent-to-own deals:
1. Lease Option
This is the most common type.
You rent the house for a few years.
You pay an option fee up front (usually 1% to 5% of the home price). This holds your right to buy the home later.
You are not required to buy the home when the lease ends, but you can if you want to.
Pros:
Flexible—you can walk away if things don’t work out.
Gives time to fix credit or save money.
Locks in a purchase price ahead of time (in most cases).
Cons:
If you don’t buy, you lose the option fee.
You might still be responsible for repairs.
Monthly rent may be higher than normal.
2. Lease Purchase
This one is more serious.
You agree to buy the home at the end of the lease.
There is no option to walk away.
You still pay an upfront fee and monthly rent (part of which may go toward the purchase price).
Pros:
A great way to secure a home without a mortgage right away.
Forces you to plan for homeownership.
Cons:
You must buy the home—no backing out.
If you lose your job or can’t qualify for a loan later, you may lose everything.
Repairs and taxes may still be your responsibility.
How Rent-to-Own Works in Tennessee
Every deal is different, but here’s what usually happens in Tennessee:
You and the seller sign a written agreement.
You pay a non-refundable option fee or deposit.
You rent the home for 1 to 3 years.
You may pay extra each month (called “rent credits”) that go toward the purchase.
At the end of the lease, you either:
Buy the home (using a loan or cash), or
Walk away (lease option only).
Important Things to Know Before Signing
✔ Get it in writing – Always have a written contract that clearly states the price, lease term, option fee, rent amount, and who pays for what.
✔ Understand who owns what – You are still a renter until the final sale. That means if you don’t buy, the seller keeps the house.
✔ Talk to a professional – It’s smart to speak with a real estate attorney or someone you trust before you sign.
✔ Check the home – Just like buying a regular home, you should get a home inspection before committing.
✔ Know your rights – Tennessee law doesn’t have special rent-to-own rules. So you need to protect yourself through the agreement.
Is Rent-to-Own a Good Idea?
That depends on your goals. Here’s a simple breakdown:
Owner Financing vs Rent-to-Own
At SEPFinancing.com, we also help people buy homes through owner financing—which is different from rent-to-own.
Owner financing means the seller gives you a loan and you own the home from day one. You don’t rent it—you start making payments just like a mortgage.
Rent-to-own means you rent first, and maybe own it later.
Some buyers start with rent-to-own and then switch to owner financing later. We can help with both!
Final Thoughts
Rent-to-own in Tennessee can be a great stepping stone to homeownership—if you go in with your eyes open.
At SEPFinancing.com, we’re here to help you find the path that fits your life. Whether it’s rent-to-own or owner financing, we’ll walk you through the process and connect you with homes all over Tennessee that fit your needs.
Want to see rent-to-own homes available now?👉 Browse Listings on SEPFinancing.com
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