Home & Life

Lease-Purchase Options can be attractive for potential buyers with cash flow and/or credit problems. Under such a plan the buyer and seller enter into a lease agreement with an option to purchase the property within a specified period of time, generally within one to three years.

There is no shortage of home owners that can relate positive experiences with lease-purchase options. Unfortunately, there are nearly as many would-be home owners with stories of dreams dashed. If you are considering a lease-purchase option you are more likely to find yourself among the former, rather than the latter, group if you do your homework first. Some things to consider:

Talk with your credit union representative or housing counselor if you are considering a lease-purchase option because you can't save the down payment amount required for purchase. There are a number of programs and incentives available in most communities. One may be just right for you.

Understand the financial obligations involved. Sellers often set lease amounts higher than market value. You will likely make monthly payment to cover the mortgage, a down payment contribution and possibly even a little profit for the seller. The benefit is that you can save a little each month toward your down payment. Be careful though, there are drawbacks. If you find after a few months, or even a couple of years that you can no longer afford the lease payment the agreement may be considered breached and you will lose all the funds that you have contributed toward your down payment. Review your financial situation closely to determine if the required payments will be manageable over the long-term.

If poor credit is driving your interest in the lease-purchase option, get credit counseling before you proceed. It is important that you develop and commit to a plan to clear any blemishes while you are leasing the property. Your money will not be refunded if you are unable to secure a home loan when the time comes to exercise your purchase option.

Beware of unprincipled sellers. Review and understand the agreement completely before you sign it. You may even want to have another person review the agreement for good measure. Don't allow yourself to be rushed or pressured into a decision, take your time and ask questions until you feel comfortable.

Keep a copy of your contract as well as a record of all payments. In the event that discrepancies arise, you will need to substantiate any claims you make with verifiable documentation.

Do not sign a contract with blank spaces.

Make sure that the contract clearly states who will be responsible for such things as maintenance, lawn care and pest control throughout the lease term.

Don't despair. If this deal doesn't work out there will be others. It is better to pass if you are uncertain then it is to sign on for a nightmare.