Lease to own lets a buyer move into a home now and buy it later, often because they need time to improve credit, save a larger down payment or qualify for a loan. A lease to own deal combines a lease with an option to buy at a set price. Done well, it can help both sides. Done poorly, the buyer can lose their money and the home.

The basic pieces

• The lease: the monthly rent and rules for the tenancy
• The option fee: an upfront payment for the right to buy, which is usually not refundable
• The purchase price: either set up front or determined by a formula
• Rent credits: a portion of each payment that may count toward the purchase, if the contract says so
• The option period: how long the buyer has to decide

Who it can help

• Buyers who are working on credit or income documentation and need time to qualify for a loan
• Sellers who want steady income and a committed occupant while they wait for the sale
• Owners with a hard-to-sell property who want a wider pool of interested buyers

What buyers should know

• If you do not buy, you may lose the option fee and any rent credits
• You may still be responsible for repairs, taxes or insurance, depending on the contract
• You need a realistic plan to qualify for a loan by the end of the option period
• The home should be inspected before you sign, and the price should be reasonable compared with recent sales

Whether a lease with an option makes sense depends on your situation. Many buyers do better with a down payment assistance program or a smaller purchase. We will tell you honestly.

Always use an attorney

These contracts are legal documents with real consequences. Have a Georgia real estate attorney draft or review the lease and the option before anyone signs. We can introduce you to attorneys from our network who are paid at closing.

We work with buyers and sellers across Atlanta, Brookhaven, Decatur, Duluth, Ellenwood, Griffin, Hampton, Lawrenceville, Lilburn, Locust Grove, McDonough, Norcross, Snellville, Stockbridge, Stone Mountain and Tucker.

See also: lease purchase and down payment assistance.

Nil Patel is a licensed Georgia real estate salesperson with Keller Williams Realty Atlanta Partners. This page is general information, not legal, tax or financial advice, and nothing here is a commitment to lend. Talk to a lender and a real estate attorney about your own situation. Creative financing structures can carry legal, tax and lender-consent risks. Talk with a real estate attorney before you proceed with a subject-to, wrap-around, lease option, lease purchase or seller-financed purchase.