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A rent-to-own home, or lease-purchase agreement, might seem like the perfect solution for the can鈥檛-quite-get-there homebuyer. Maybe your credit needs a few touch-ups, or you don鈥檛 have a聽down payment in the bank yet. A lease-purchase agreement can get you in a home of your own while you sort out the buying details, right?

Yes聽鈥� but nobody says it will be easy.

First, it鈥檚 not a financial slam dunk.聽You鈥檒l likely pay a lot more up front, and聽on top of your rent, you鈥檒l pay a rent premium fee 鈥� an additional amount that鈥檚 applied to the potential purchase.

You鈥檒l still have to save for聽a down payment while also paying off bills and polishing your credit score to qualify to buy the house before the contract ends.聽Perhaps worst of all, those rent premium fees you鈥檝e been building up as earnest money for the purchase may聽be forfeited if you ultimately can鈥檛 clear all the hurdles to buy.

鈥淟ease-purchase for real estate is not as simple as the neighborhood rent-to-own store, so do not assume they work the same,鈥� says Glenn S. Phillips, CEO of Lake Homes Realty in Pelham, Alabama. Phillips has worked with rent-to-own home agreements as a landlord as well as with his multi-state real estate firm. 鈥淢any people, including some licensed agents, don鈥檛 realize the legal 鈥榞otchas鈥� of poorly designed lease-purchase agreements. This can lead to loss of money, time 鈥� and even extensive legal fees.鈥�

How a lease-purchase or rent-to-own home agreement works

Of course, no real estate agreement 鈥斅爎ent-to-own or straight-out purchase 鈥斅爄s a simple matter.聽But lease purchases can be particularly difficult to navigate.

Some agreements are structured as lease options 鈥� you rent the home and have a non-binding option to buy it聽eventually. A lease-purchase home agreement is more definitive, with a set purchase price聽and聽a limited time frame. With both, make sure you understand:

• You鈥檒l likely聽pay a substantial deposit鈥� in addition to the usual upfront costs such as聽a pet deposit 鈥� and have a monthly lease payment (the rent) with an additional fee (the rent premium that builds up as earnest money).
• Lease payments may or may not fully apply to the purchase.
• The rental premium payments may not be refundable if you don鈥檛 end up buying. In most instances, contracts are structured so that if the purchase does not take place, the owner of the property keeps all payments.
• State laws vary, so you鈥檒l need a real estate attorney on your side.

鈥淎n alternate approach to a single lease-purchase agreement is to use three contracts,鈥� Phillips adds. 鈥淥ne is a standard real estate purchase agreement that has a close date that may be months or years away. The second is a standard rental agreement for the time frame prior to purchase. And the third contract is a purchase option agreement that indicates under exactly what conditions the buyer is given credit for lease payments at the time of purchase.鈥�

In this scenario, the purchase option may include a requirement for the buyer to pay the owner some amount of money 鈥斅燼 deposit 鈥斅爐hat is nonrefundable. In exchange, the owner removes the home from the market.

鈥淭his seems complicated but in reality can be a much cleaner legal approach and, once understood, avoid confusion for all parties,鈥� Phillips says.

Can rent-to-own be a path聽to homeownership?

Rent-to-own agreements can鈥檛 remove all of the barriers to homeownership. For example, if the buyer can鈥檛 afford a minimum down payment 鈥斅爋r if the monthly rental payments are a financial stretch 鈥斅爄t鈥檚 doubtful he or she will聽ever make it to the closing table for a purchase.

鈥淒on鈥檛 start down a path that is doomed from the start,鈥� Phillips advises.

Lola Audu of Comstock, Michigan, has been a real estate broker for more than 20 years聽and聽has experience with leases that contain purchase options. And from what she鈥檚 seen, the results have not been good.

鈥淚n my experience, they have never panned out to a purchase,鈥� Audu says. 鈥淏uyers who can鈥檛 finance a purchase are often not the best candidates for homeownership. Credit and down payment issues are fundamental, structural problems. They need to be corrected prior to purchasing a home rather than trying to purchase through a lease and work on financing issues.鈥�

She says lease-purchase arrangements often become 鈥済lorified rental experiences.鈥�

鈥淲hen the initial excitement of being in a home wears off, the buyer no longer has the incentive to continue to do what is necessary to make the necessary corrections to obtain financing,鈥� Audu says.

Phillips of Lake Homes agrees: 鈥淥ur experience is that lease-to-own rarely becomes a purchase.聽If it looks like a shortcut to homeownership, it is not.鈥�

Although, he says, never say never:聽鈥淚 do have one property right now where I have a very long-term renter who I believe will convert to a purchase. This is an exception, and we did not start out with anything but a simple lease to begin with, then discussed a possible purchase later.鈥�

Some companies want聽to reinvent rent-to-own homeownership

So the rent-to-own route looks to be a winding road full of potholes. Seems like it鈥檚 nearly impossible to get from here (renting) to there (owning). But at least a couple of companies want聽to change the lease-purchase landscape.

Imagine finding a home listed for sale in your market 鈥� one you really love 鈥斅燼nd having someone buy it and lease it back to you with an option to purchase. That鈥檚 what Home Partners of America does.

The process starts with an initial application and a nonrefundable $75 fee. If your聽prequalification application is approved, you submit a full application, which involves聽pulling a credit report. Then Home Partners tells you the maximum monthly rent you qualify for.

From there, you contact a real estate agent聽and聽find a home you鈥檙e interested in, and Home Partners negotiates a purchase. The company pays cash, which usually facilitates a quick transfer of ownership. Then you sign a one-year lease with Home Partners, as well as a right-to-purchase agreement detailing the price you鈥檒l pay for the house if you exercise your option to buy. You鈥檒l also pay a deposit, usually amounting to two months鈥� rent.

You have the option to buy the home at the pre-determined price anytime within the next three to five years, but are only committed to lease the home for one year.

The company currently serves residents in 34 cities in 18 states, including California, Texas, Colorado and Florida. It claims to have bought $1 billion of real estate to put more than 9,000 people (and 2,500 pets!) into 鈥渓ease with the right to purchase鈥� homes.

HomeLPC is another rent-to-own startup, though it currently offers its program only in California and Texas. But the firm aims聽to serve 20 states by the end of 2016.

Making a move with a purchase-option agreement

Maybe a聽purchase-option agreement can eliminate a couple of moving-truck loads on the road to homeownership. It鈥檚 an appealing prospect: Move into a home now, work out the wrinkles so that you can qualify to buy and ultimately close the deal聽without packing another box.

It might not be easy, but finding a way to crack the homeownership nut might make it worth all the effort.

Hal Bundrick is a staff writer at NerdWallet, a personal finance website. Email: hal@nerdwallet.com. Twitter: @halmbundrick. This article first appeared in NerdWallet.