Danielle, 23, and her husband, 24, from Salt Lake City have applied for a state-sponsored rent-to-own program.
Rent-to-own programs allow tenants to rent a home with the option to buy it later. They’re often seen as an alternative path to homeownership for people who can’t afford a down payment or don’t qualify for a traditional mortgage.
With U.S. home prices continuing to rise — the median price as of Q2 2025 is $410,800 — and 30-year mortgage rates hovering around 7%, owning a home can feel out of reach for many Americans.
So Danielle called into The Ramsey Show to ask if a rent-to-own program was a good option. Host Dave Ramsey’s response? “Please don’t do this.” Here’s why he quickly torpedoed the idea.
In a rent-to-own scenario, the tenant signs a contract in which they rent a property with the option — or, in some cases, an obligation — to buy the home at a set price and time. This setup helps the tenant save for a mortgage while living in the house.
In Danielle’s case, the state program runs for 15 years, and there’s no option to buy until the of the term.
The couple has $6,000 in debt and no emergency fund, which they depleted after recently having a baby. They’re now working to rebuild their finances.
“Essentially all of our rent payments would go towards equity on that home,” Danielle said, adding the monthly payment would match what they already paid in rent, but in the end, they’d own a house.
“Not under any circumstances would I do this,” Ramsey said. “I would not rent for 15 years on purpose.”
A lot can change in 15 years. If they don’t end up closing on the home, all the money goes to the rent.
“If you never close on it, 100% of the money went to rent,” said Ramsey. “I’ll give you a 100% chance you never close on it.”
Instead, he suggested they get out of debt, build an emergency fund and start saving for a down payment. With a clear budget and savings plan, they might be able to buy a home much sooner than through a rent-to-own contract.
Read more: Nervous about the stock market in 2025? Find out how you can access this $1B private real estate fund (with as little as $10)
If you’re saving for a down payment, you’ll want to grow your money in an account that earns decent interest, not one with a rock-bottom rate.
Start by setting a savings target. Do you want a condo or a house with a yard? What area do you want to live in? If it’s pricey, would you consider a more affordable location?
Once you’ve picked a target area and home type, research average prices. Then pick a purchase date — say, four years from now — and calculate how much you’ll need to set aside each month to reach that target.
A 20% down payment lets you avoid private mortgage insurance (PMI), which adds to the cost of a loan. But if saving that much delays your purchase, a smaller down payment might be worth it — even with PMI — if it gets you into a home sooner and starts building equity.
First-time homebuyers like Danielle and her husband may also want to look into Federal Housing Administration (FHA) loans.
“FHA provides mortgage insurance to FHA-approved lenders to protect these lenders against losses if the homeowner defaults on the loan,” according to the agency. The borrower pays the cost of this insurance, but FHA loans can be easier to qualify for than conventional loans.
There are different ways to grow your money while you save for a home.
A money market account (MMA) combines features of checking and savings accounts, offering higher interest rates than traditional savings and the ability to use checks or a debit card.
A high-yield savings account (HYSA) typically offers annual percentage yields (APY) of 4.40% or more — much higher than traditional savings. Some of the best rates come from online-only banks, but they require a minimum balance or charge fees, so it pays to shop around. Like other savings accounts, HYSAs are FDIC-insured.
Another option is a certificate of deposit (CD). CDs can offer higher rates than traditional savings, often similar to HYSAs. CDs lock in your rate for a fixed term — say, one to five years — but if you need the money early, you’ll pay a penalty.
To maintain some flexibility, you might consider a CD ladder — buying CDs with staggered term lengths. This strategy can give you better returns than a HYSA while preserving some liquidity.
You can also look into a taxable brokerage account, which allows you to invest in stocks, bonds, mutual funds and ETFs. There are no penalties for early withdrawals, although you’ll pay taxes on your gains when you sell investments.
While rent-to-own can be a path to homeownership for people with limited credit or other financial barriers, it may not be the best fit for a young couple like Danielle and her husband. Saving for a down payment could get them into a home sooner — and start building equity right away.
“If you bought a house in four years,” Ramsey told them, “that’s 11 years sooner than the plan.”
Stay in the know. Join 200,000+ readers and get the best of Moneywise sent straight to your inbox every week for free. Subscribe now.
This article provides information only and should not be construed as advice. It is provided without warranty of any kind.
