Under a lease-purchase agreement, also known as “rent-to-own” or “lease with option to purchase,” the property seller is also the landlord, and the buyer resides in the property as a tenant. Typically, the buyer pays a fee upfront, or a down payment, in exchange for the option to buy the home within a specified period. If the buyer engages the option, part of their previous monthly payments may be applied toward the down payment.
In this scenario, either the seller or a financial institution can provide the buyer with credit for the remaining purchase amount, which the buyer repays gradually, and the property deed is transferred to the buyer at the loan’s outset.
However, if the buyer isn’t able or is unwilling to finalize the transaction, the arrangement might allow the seller to keep all or some of the buyer’s down payments.