How to Buy a Home Through a Lease Option Purchase

After the real estate bubble burst, loan approval is much harder to come by for many individuals. One of the most viable options for those who are looking to achieve the dream of home ownership is a lease option home. While entering into a lease option agreement varies by real estate company, the road to home ownership is basically the same in each state or region.

The first step in the process of securing a lease option home is knowing your credit score. A down payment of $1,500 - $3,000 is often required upfront when buying a home on lease option. Even those with poor credit scores can typically secure a lease option agreement. The best companies work with debt repair providers to assist the potential owners rebuilds their credit. A lease option home is nearly identical to a land contract, and is often referred to as "rent to own" in many areas. A foreclosure or bankruptcy is usually the only reasons an individual will be turned down for a lease option purchase.

The second step in purchasing a home through a lease option agreement, is securing a reputable real estate agent. An agent will be able to help find a home, and read the fine print on the deep stack of forms to be signed. All lease option agreements state the required down payment, the monthly lease payment, and the time frame that the purchaser must adhere to for the full purchase of the home. A real estate agent will go over the agreement in detail with the buyer, in order to prepare them for the sale closing. Understanding the lease option agreement is paramount to safeguarding the buyers from losing the home if not all requirements are met on time.

The third step to entering into a lease option agreement to purchase a home is to understand how the process works, and how full ownership of the home can be achieved. Most lease option agreements require the purchaser to secure a loan after a specific period, in order to pay the remaining money owed toward the full purchase price of the home. If all requirements are not met in the agreed upon period, the home will revert to the original owner, and the potential owner will not have any previously funded money refunded.

A fourth step in buying a home through a lease option plan would be patience and communication with the original owner, or Real Estate Company who holds the deed to the property. While the home is not technically a rental, the buyer does not have all of the rights typically associated with home ownership during the lease period. Most companies have specific rules regarding pets, children, painting, etc. which must be followed or the lease could be terminated without a refund. A security deposit is often required when entering into the lease option agreement. Damages usually have to be paid by the leaseholder, and can be cause for lease termination.

Owning a home through a lease option agreement is finalized after the stated time for the end of lease has passed, and the buyer has been able to secure a loan for the home. It is very important to be wording with a lender far in advance of the lease end deadline. A lease option company can terminate the lease the minute the deadline has passed, without any obligation to the buyer. Should the lease be terminated, the home is immediately placed back on the market, and a new buyer will begin the lease option process on the same home. Some companies offer in house lending, but an outside and independent source is highly advisable to avoid any conflict of interest, or loyalty issues.

Sources used for this article include personal experience, and real estate training.