So, What’s the Difference Between a Lease Purchase and a Lease Option?

Published by julia | Filed under Buyer / Seller Tips, Market Trends, Real Estate

What do you do if you want to buy a house, but don’t have the good credit necessary to obtain a mortgage? Or perhaps you can get a mortgage, but are short for money for a down payment? How do you get your house then? Fortunately, there are ways to get a house without a traditional mortgage, and one of these ways may be just what you’re looking for. If you really want to get your house, you may want to get the seller to consider doing a lease purchase or a lease option.

Either of these options allow you to avoid the banks, and may not require a huge down payment. But what are the differences between these two options? Well, there’s really only one difference, but it’s a VERY significant one.

With a lease purchase, you’re agreeing, and actually contracting, to buy the house after the lease period is over. With the lease option, you’re agreeing to lease the house for a specific period of time, with the option to purchase at the end of the lease if you so choose. In both cases, part of your monthly payment for the lease will go toward a down payment for when you later apply for a traditional mortgage to buy the house. With a lease option, if you choose to not buy the house, you lose the money that was set aside for that purpose.

With the real estate market being what it is, more and more sellers are offering lease purchase and lease option agreements to entice buyers to take houses off of their hands. Even if you find a house you want to buy that isn’t currently offering either of these options, the chances of talking the owner into going in this direction is high. If you can’t get a traditional mortgage now, a lease option or a lease purchase offers you an excellent opportunity to save up money for a down payment while cleaning up your credit for a few years, thus making you a much more desirable mortgage candidate when the lease period is over.