postheadericon How to Buy a Lease Option

Buying a home can be difficult for first-time buyers. For those who have less than perfect credit or don’t have enough money for a down payment, a lease option to buy can be the best alternative to home ownership. You can build your credit and equity while you reside in the home you want to own and find out if you truly want to live in it.

How to Buy a Lease Option

1 Check the basic information on the lease option to buy contract. Identifying information includes property address, buyer’s and seller’s names or any other parties involved. The contract should also include the length of time before you have the right to purchase the property, usually 3 to 5 years. The contract must state the sales price of property when it will be sold.

How to Buy a Lease Option

2 Make an agreement on “option of consideration.” Option of consideration is the amount of money you pay the landlord when the home is kept off the market for the duration of the contract. This is usually between 2.5 to 7 percent of the property purchase price that is agreed upon. This is a separate payment and is not included in the lease deposit. This is non-refundable if you decide not to buy the property. However, in the event that you carry out the purchase, the amount is 100 percent deducted from the sales price.

How to Buy a Lease Option

3 Determine how much rental credit will be used to build equity. When a tenant pays monthly rent, part of that rental payment is allowed to go towards rental credit which is accrued to build equity in the property. It can go up to 50 percent of monthly rent depending on the contract. You must understand that if you are late with the payment, no amount is credited for that month. This is also non-refundable should you decide not to buy the home. But, the total amount of your rental credit, along with option of consideration, is subtracted from the sales price if you purchase the property.

How to Buy a Lease Option

4 Be aware of who is responsible for repair and maintenance. In a typical landlord/tenant agreement, the landlord pays for utilities and must make sure that appliances work. Other issues are negotiable such as broken light fixtures or plumbing.

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