What is a Lease Option?

What is a Lease Option?

A lease option is an agreement between a renter and a landlord where the renter signs a lease with an option to purchase the property. Such an agreement only binds the seller, while the tenant may choose to make a purchase or not.

Lease options are common among buyers who would like to own a home but do not have enough money for the down payment and closing costs. This option may also be attractive to tenants who are working to improve bad credit before approaching a lender for a home loan.

Entering into a Lease Option

In a lease option, a landlord agrees to give a renter an exclusive option to purchase the property. The option price is usually, but not always, determined at the outset and the agreement states when the purchase should take place-for instance six months, or a year or two down the road.

A portion of the rent is used to make the future down payment in a lease option. Most lenders will accept the down payment if the rental payments exceed the market rent and a valid lease-purchase agreement is in effect.

Before you opt to do a lease option, find out as much as possible about how they work. Talk to real estate agents, read published materials, and have an attorney review any paperwork before you enter into the agreement.

If you are interested in entering into a lease option, contact Damon Michels today to learn more and help you through the process.


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