What is a Lease Purchase ?

A lease purchase is a combination of a real estate rental and real estate sale. It is a lease for a fixed time period such as 12 or 36 months with a provision that at the end of the lease period, the purchase agreement portion of the contract is executed.

A lease purchase allows a buyer to live in the home while you establish your credit, save for a down payment or otherwise prepare to buy. By buying a home with lease purchase terms you also have time to create a good payment history, which could help you in acquire a new mortgage are favorable rates.

A lease purchase gives the buyer the option to lock in the purchase price, then complete the purchase at anytime during the traditional 12-36 month lease period or as spelled out in the agreement.

As the buyer in a lease purchase, you are obligated to complete the purchase of a home or you may be subject to the loss of your deposit. The seller is, legally required, during the lease purchase period, to sell to you, and no one else. If you have bruised or bad credit, that is repairable, a lease purchase may be the best solution to home ownership.

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Lease purchase transactions usually require employment and income verification and often a completed mortgage application, to make sure that the buyer can afford the monthly lease payments and will qualify for a mortgage at the end of the lease term. Next, the deposit fee is paid in order to secure the current purchase price as well as a future closing date. Sometimes a portion of the monthly lease fee is applied to the purchase price of the home. Then, you are paired with a mortgage specialist to assist you with financing to close the deal. As the buyer's ability to qualify for a mortgage improves, the buyer and mortgage professional decided on when the purchase should take place subject to the terms of the lease purchase agreement.