Lease, with an option to purchase or a Lease Option to Purchase is where the seller and the buyer get into an agreement to purchase the house property at a future date. Both the buyer and seller enter into a contract which has two basic parts: (1) Lease or Rental Agreement and (2) Option Contract to Purchase Real Estate. The Buyer makes a non-refundable option deposit with Seller which may or may not be endorsed towards the agreed sale price. The Seller gets the lease payments and also collects a second payment each month which put up credit towards the sale price. At the end of the term, Buyer has the right to choose whether to purchase the property or not. But the seller is at compulsion to deliver the property to the buyer to exercise his option. If the buyer chooses not to purchase the property he will however have to forfeit the down payment and the monthly payments.
The monthly Lease payment does not go towards the purchase price. Only the down payment and the additional payments every month will be credited to the purchase price. The sellers will maintain house owners insurance and pay the property taxes during the period. After the buyer obtains loan for permanent financing then he will have to pay the insurance and other taxes. The buyer can also purchase a Homeowner Warranty Policy for the Home. The policy will cost between Three hundred dollars to Four hundred dollars every year depending on the home warranty you wish to purchase. Usually, the policy is only for one year and can be renewed.
If you have decided to purchase or refinance the home you need to wait till the end of the lease term, you can exercise the option any time before the end of the option term. You can also get it converted to the sellers Owner Financing program if you wish. The same thing is the procedure for refinancing. The Lease option is just like a contract. At the end of the contract, you have the choice either to buy the home or just walk away. However, if you do not exercise your option to buy the home you will lose your down payment and any other payments made as credits to the purchase price. In an owner financing program you will have to obtain loan from the seller at the end of the Lease option. Until you obtain a loan or convert to Owner Financing program you will not be able to get tax split and write-offs, pay down your mortgage to build more equity, and other enjoyed by homeowners.
If you choose to change rent to own to an owner financing the companies provide you five percent close to your down payment. It will only take one or two days to get them all approved. Once it is approved it will be credited to the purchase price of your home and any other closing costs associated with your home purchase.