The Lease Option or
Rent-To-Own program is just another tool to purchase a home. It allows
a buyer to get started on home ownership with a low initial
investment. It provides the buyer an opportunity to build a
down-payment over time while locking in the house and price right now,
This is accomplished by having a portion of the monthly rent go
towards the down-payment.
Lease-Options save time and expenses in the beginning as they do
not require bank approval or require the buyer to go through or
qualify through the lender's loan process. No bank fees are
required to do the initial steps in a Lease-Option
For buyer with no or blemished credit the Lease-Option period
allows time for the buyer to establish credit or repair damaged credit
thus saving large sums of money buy qualifying for a better interest
rate and ending up with lover monthly payments
The buyer should speak with a lender or mortgage broker to
determine what type of loan they might qualify for and what they need
to do to qualify for the best loan at the end of the Lease-Option
period. Carrying out the needed steps are then the responsibility of
the new buyer.
Rent-To-Own programs typically require a Lease-Option Deposit of
several thousands of dollars as a guarantee that the buyer will
purchase the home at the end of the Lease-Option period. Should
the buyer not complete the purchase for whatever the reason the
deposit is lost. If the buyer exercises the Option-To-Purchase
the deposit is credited toward the down payment. The amount of the
deposit is determined by the amount of down-payment the buyer will
need to have to get the loan they are interested in. At the end
of the Lease-Option period the Deposit plus the rent credit plus what
ever additional monies the buyer will be able to supply will need to
meet the lenders down payment requirement.
The monthly rent will usually be higher than just a normal rent to
allow a portion of it to be credited towards the down-payment.
The price of the house might be slightly higher than what it would
sell for now since the owner has to wait for his money and may end up
Repairs are often the responsibility of the tenant-buyer and should
be carefully spelled out in the contracts as should be items covering
new furnaces or roofs or other major expenses. My suggestions for
items like furnace or AC replacement is the sellers has them done and
pays for them up front and the cost is added to the price of the
house. The new owner will get the benefit of the new items and
not have any large sum to pay reducing the amount they will have for
There are risks for the buyer in that if they do not exercise their
option the deposit and additional amount they paid in rents will be
lost to the seller and both parties now have to start over.
A Lease-Option can be a good deal for the disciplined
buyer looking to save money.