Lease purchase agreements: when you’re not quite ready to buy

In the current economic climate buying a home can be a bit more difficult than you might imagine, with credit difficult to get and many families having fallen on hard times. Credit scores have dipped while credit requirements have become harder.

This does not mean that you cannot still buy a home; however, there are a number of different options available to you, including renting a home with a lease purchase option. If you decide to do this, you will need to sign a lease purchase agreement.

Basically, a lease purchase option is an agreement that says you want to buy the property from the owner; however, because of a lack of funds or low credit score, you are not quite ready to buy just yet. Sometimes the lease purchase option is initiated by the owner, who is not quite ready to sell just yet, but knows he does want to sell and uses this type of contract to seal you into an agreement.

When you enter into a lease purchase contract, you will be asked to pay a lump sum upfront. This amount of money is your surety that you will be allowed to purchase the property at a later date; if the owner backs out and decides not to sell, he will need to refund this money to you. The amount can vary and will depend on the person offering the lease purchase option, but most often it is between 5-10 percent of the purchase price.

This is a legally binding contract, and it is important for you to understand this before you enter into the agreement. If you are unable to complete the requirements of the contract, then you will forfeit the money you put up for the home. It is very important that you read through the entire contract very carefully before you sign it or hand over you money.

The end of the contract can vary greatly, depending on whom you are dealing with and the agreement that you both came up with. You may be required to cash the contract out at the end of the agreement, which can mean you need to be able to get a mortgage by that time. Be careful not to commit to anything you are not sure you can finish.

A lease purchase agreement can be a great way to get the property and home you want but are not in a position to buy just yet, as long as you are cautious and understand the agreement clearly.

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