Buying a Home: Is a Lease Option for You?
Lease options can be a great opportunity for those interested in buying a home but who are still cautious about the state of the real estate market or don’t have the best credit scores right now. So is a lease option for you?
What is a Lease Option?
A lease with option to purchase is essentially very similar to rent-to-own or seller financing. It involves two separate legal documents which enable those buying a home to get in to a great property now and rent it while reserving the right to buy it later, within a specified period of time. This often runs between 6 months and 3 years.
What are the Advantages of Lease Options for Buying a Home?
- Stop moving around and get into your dream home now
- Able to lock in a good price on an appreciating home
- Avoid having to qualify for a conventional mortgage loan now
- Gives time for buyers to improve their credit and finances to get a better home loan
- Should circumstances change or the home value dip buyers can keep renting or walk away without being caught underwater and in debt
What to Watch Out For
While lease options are very attractive for both those looking for a new residence and real estate investing they should be approached wisely.
4 things to look out for:
- You will have to put up ‘option money’ which could be lost if you don’t buy the home
- Make sure you have the right to assign the option to someone else
- Keep on track with re-building credit from day 1
- Make sure current owner/ seller is really in a position to hold up their end of the agreement and are not in foreclosure or deep underwater