Buying a home is a dream for many people, but not everyone can arrange finance instantly to buy a new home. There may be several reasons such as current low income, bad credit, rejection of loan application and so on. Whatever may be the reason, if you are not able to get some hold on the house you like now, you won't be able to buy the home later.

A lease purchase agreement is a special contract between the buyer and seller in which the buyer agrees to buy the house after a few months or years. This way, you don't have to make huge down payments immediately and you will have time to save for your home.

Reserve now, pay later

A lease purchase agreement requires the buyer to pay a down payment towards the purchase price of the house. This is generally 3% of the price of the house and may be lower or higher depending on the choice of the seller. In addition to this amount, you have to pay one month rental of the house as cash deposit. Once you are ready to pay this amount, you have to enter into a lease purchase agreement or lease option. With lease option, you are not obliged to purchase the property, but you can purchase the property when you exercise your option. The lease purchase agreement on the other hand requires you to purchase the property at the end of the lease period. In both the cases, your cash deposit is typically non-refundable.

In a lease option as well as lease purchase agreement, you have to pay monthly rentals for the home. This amount will also be specified in the contract. A portion of your monthly rental will go to the purchase price of the home so that you pay less at the end of the lease period. If you wish to extend the lease period, you must get consent from the seller. Only if both parties agree, the lease period can be extended. So, before deciding on the actual lease period, you must estimate your finances and understand when you will be ready to buy the home. A lease purchase agreement is definitely beneficial for the buyer as you can buy the home later for the price you agreed earlier.

You will lose if you don't plan

If you take up the lease option, you have to plan your finances properly. As you will get one or two years time to buy the home, you should look for sources to save money to buy the house. If you default rental payments in the middle of the lease period, the lease purchase agreement allows the seller to cancel the agreement. You should avoid this situation, as you will lose your benefits and money when the agreement is cancelled by the seller.

While most sellers are interested in selling the home quickly, it is not very easy to find homes offered on a lease option. However, if you approach right places, you can find homes offered with a lease purchase agreement. You have to carefully go through the agreement and ensure that no terms and conditions are against the law.