Learn the Basics of How a Purchase Lease Works

A purchase lease may be a good way for you to ease into home ownership. A purchase lease option is especially helpful if you don’t have good credit or a down payment built up for your first home. Here’s how a purchase lease works, and what you might need to do to get into one.

First, you put down an option payment on a house. This is non-refundable. You’ll need to work with the seller and a real estate lawyer to draw up a contract for the purchase lease. You’ll agree to rent the home from the seller for a set amount of time, normally one to three years. After that time, you’ll agree to buy the house, according to the purchase lease agreement.

As you pay on your purchase lease each month during the rental period, part of your purchase lease payments will go toward the eventual purchase of the home. The rent that you’ll pay will likely be higher than market rent, but it also acts as forced savings on a purchase lease. During the lease period, you’ll probably be responsible for paying for upkeep on the home, as well as paying for things like insurance and taxes.

At the end of the lease period, you’ll apply for a purchase lease mortgage. You probably won’t have to put much down on the property, and you won’t have to take out a loan for the full purchase price because you will have been paying toward that.

A purchase lease can be a good option for buying your first home, but it can also be expensive. Do your research, and make sure it is the best option for you.