Land contracts and lease options don’t require mortgages.

If you’ve been told you can’t qualify for a mortgage, there are still avenues available to home ownership. One way to purchase a home is through a land contract or contract for deed. A second method that eventually will get you a home is through a lease option or rent-to-own contract. Neither a lease option nor a land contract requires you to take out a mortgage.


Lease Option

A lease-option or rent-to-own contract for a home is both a standard lease and an option to purchase the home. Both are separate things. Under a lease option on a home, you first execute a lease with the seller/landlord. Like any property lease, a lease option creates a landlord/tenant (or lessor/lessee) relationship, and depending on how they are written up the tenant nay or nay not be responsible for all repairs to the house. Generally, sellers in lease-option contracts have to put part or all of the rent you pay them toward the home’s final purchase price. Some sellers do and some do not, Again depend on what was negotiated before everyone signs.

Land Contract

In a typical land contract, you and the seller would execute a purchase contract, with the seller financing your purchase. Although you won’t gain actual title to your home under a land contract, you’ll gain an equitable title and interest in the property. Once you’ve paid the seller in a land contract off, he’ll convey the actual title to you, if done properly, and no leans are on the property. Under a land contract, you have the right to improve and even rent your home, in most cases, again depend on what was written up and agreed upon at the time of the signing. For more information about this see Our previous article on WordPress,



Both lease options and land contracts can be effective methods for purchasing a home if you have poor or no credit. Buyers in land contracts also generally receive the same tax benefits any owner would get. Again depending upon how the contract is written and what is agreed upon at time of signing.  The benefit to a lease option is that you have an option to purchase the property, at normally what ever agreed price is established between buyer and seller. You have the first right or option to purchase the property; However You’re not obligated legally to purchase the property in a lease option.


A lease option creates only a landlord/tenant relationship and not an ownership situation for you. In most cases. Again depends on what was agreed upon at the time of the signing. Under a lease option, a landlord still controls the property. Also, if you don’t exercise the purchase option in a lease-option contract, the landlord is free to lease it to someone else at the end of your lease, or possibly sign another agreement with you. Lastly, tenants and buyers can’t use their property as collateral under either lease options or land contracts.

Choosing One

Those with no down payment but who want to own the homes they’re living in eventually can benefit from lease options, if the lease agreement is written up that way. Land contracts tend to benefit those with money for a down payment and who want some home-ownership benefits now, and can give you more freedom with the property, again deepening on how the contract is written. If you’re uncomfortable with a landlord exercising control over your home, a lease option might not be for you. If your property under a land contract loses value, you’re still stuck with it, unfortunately. Again for more pros and cons of land contracts, se our blog on WordPress,

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Please note that we are NOT legal Counsel, if you seek legal advise please seek a legal real estate counsel near you.