• Selling Costs
• Making An Offer
• Realtors
• Buying Bank Owned
• Mortgages
• Buying Real Estate
• Sell Your Home
• Seller's Guide
• Selling Basics
• Selling A House

• Appraisal And Market Value
• Selling Contacts
• Real Estate Agents
• Tax Considerations
• Short Sales
• Seller Financing
• Property taxes
• Negotiating
• Lease Options
• Escrow And Closing Costs
• Disclosure
• Raffling Your Home

What Is A Lease Option?

So what do you do if you have found the home of your dreams but do not have the financial sum required for a down payment and closing costs? You could just wait until you have the necessary funds to pay for these initial costs, but considering how time consuming and difficult it is to find a home that you love, this is an option that you don't want to consider. However, this is the only option you have as you just don't have the money to buy a home, right? Wrong. There is one option open to you and that is a lease option.

Not only advantageous for prospective homebuyers, a lease option is a popular route for home sellers to go down when trying to sell their home, particularly in times when the housing market is slow. For those individuals wondering, "what is a lease option," here is the answer.

Lease Option Defined

A lease option is an agreement between a home seller and a prospective homebuyer that is signed on the lease in which the prospective homebuyer has the option to purchase the home for a specific price within a certain time period. This option benefits the prospective homebuyer as they are able to work to securing a home for sale while living in their potential home.

During the lease, the potential homebuyer pays monthly rent which incorporates rent credit. Rent credit only accumulates if the potential homebuyer makes rental payments that exceed the market level of rent. With rent credit, a portion of the rent goes to the purchase of the home if the lease option is exercised. In order to make this option valid, a copy of the lease purchase agreement must be attached to the homebuyer's loan application if there is one in effect.

Advantages For Sellers

For individuals that are selling their home, a lease option presents a number of advantages. Financially, lease options ensure that home sellers will receive monthly rent payments that are above market levels. Also, home sellers will receive tax-free use of this lease option until either the loan option is exercised or expires. Therefore, a lease option is a win-win solution for homebuyers and home sellers.