Many people shy away from owning a house for many reasons. They may include bad credit, self-employment, a low income, or lack of cash. If a mortgage from a lending institution is not in the horizon, a lease option is an excellent alternative. Short for "a lease with an option to buy", a lease option automatically grants you the right to purchase a property. Along the same token, it allows you to improve your credit score and present yourself better in the eyes of a mortgage lender.



Just as the name implies, a lease option is like signing off on two contracts: a lease contract and an option to buy. A lease is simply a rental agreement on the property that outlines all of the typical terms and conditions, like the rental rate and term. In a lease option, the option part allows you the right to buy the property someday down the road. In a typical lease option contract, terms include the purchase price on the property, the expiration date of the purchase option, and the percentage of rent that will go towards the price of the home every month.

Lease options are one of the best ways to assume ownership rights on a home. It allows for easier qualifying than a mortgage loan and works along the same level as renting. This type of property finance only requires that your credit and employment record be "normal." Unlike a mortgage lender, property owners will not scrutinize your credit record for a lease option. Secondly, the initial investment required to fit under a lease option agreement may be as low as one month's rent plus a security deposit. With a typical move-in, you cannot add your Plasma TV into the house unless you drop a $5000 down payment.

Third, lease options can allow you to improve your credit. With home ownership, credit reports must be in top shape to get the best mortgage terms. With lease options, you can scale back on spending and keep paying your debt until you are ready to take on a mortgage loan full-force in the future.

Fourth, lease optioned homes have a firm selling price. By negotiating wisely and exercising your option when the lease ends, your home's market value could soar, exceeding its option price. Appreciation may allow you to borrow nearly all of the money needed to close the sale. This especially rings true if you've tried to improve home equity via improvements.

Lastly, lease options literally force you to save for the down payment, assuming you take up on the option to buy. Lease options can apply up to 50 percent of your rent towards the down payment, with the amount being negotiable. Plus, after you have promised to buy the house, it should be ten times easier to make cuts on other spending and add more money towards the house pool. Lease options are an excellent choice for anyone looking for an easy way to finance a home.