What is a Lease Purchase Agreement?

Using a lease purchase agreement to buy a home can be a good idea. It’s especially good if you don’t have good credit or a big down payment saved up. A lease purchase agreement can help you save money for a home and buy a home you’re already renting.

A lease purchase agreement can work in different ways. The laws are different by state, and you can even tailor the agreement to meet your needs and the seller’s needs. Basically, the lease purchase agreement is the contract that you sign for renting to own a home.

Normally, you’ll pay a lump sum to get the lease purchase started. This sum doesn’t go toward the home. All it does is to ensure that the seller can’t sell the house out from under you unless you forfeit your lease purchase rights. After this payment, you’ll make lease payments that are normally slightly above market rental prices.

A certain portion of your lease payments will go toward your eventual payment on the home. It’s important to know exactly how much of your lease payments goes there so you can financially plan for the future. The lease purchase agreement should state exactly how much money goes toward your purchase of the home over the life of the lease. You should know just how much you’ve paid on the house by the time you’re done leasing it.

At the end of the lease purchase agreement period, you’ll be able to buy the home for a pre-stated price or current market value.