Q:

What are some good tips for leasing a house with the option to purchase?

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Quick Answer

The best tip for buying a house at the end of a lease period is to secure an agreement binding on both the buyer and the seller over a term of several years. A solid lease-purchase contract, the core of a rent-to-own arrangement, is attractive on account of its flexibility, states U.S. News & World Report.

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Full Answer

Formally called a lease with option to purchase contract, this agreement blends a standard rental agreement with the right of first refusal on the property for the buyer or tenant at the end of the lease term. The buyer pays a deposit on the property to the seller or landlord over the term of the lease, as noted by JustRentToOwn.

For a tenant who is a prospective buyer, a low initial requirement for funds is helpful if he first has to sell another home, has a low credit score that prevents him from obtaining a mortgage, or does not have ready funds available to make a full down payment on a house. For a prospective seller, becoming a landlord under a lease-purchase contract makes it easier to secure a tenant for a property to be sold, according to U.S. News & World Report.

At the end of the lease period, the prospective buyer has to renegotiate the terms of the lease, secure a traditional mortgage, or else pay for the house outright if he wishes to retain his purchase option. Otherwise he forfeits to the seller the deposit funds invested over the term of the agreement, per LawInfo.

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