Everyone basically hit it on the head where there are two paarts to the transaction. First is the lease. The seller sets a lease amount and a period of time for the lease i.e. 1 year, 2 years etc, then is the purchase part of it. You would sign a purchase and sales agreement for a set price and a specified closing date. In the lease agreement it would spell out how much of the rent will be crdited if you purchase the property i.e. $100, 1/2 or all. The credit can be used towards you down payment and/or closing costs. Some sellers may ask for a deposit as well. Check to see if the deposit is refundable if you do not purchase or is non refundable if you do not purchase. As well you should note that if you do not purchase, you do not get any of the rent credits. Before signing an agreement you should check with a mortgage company to make sure you will be able to afford the house and what you will have to do during the lease period to obtain a mortgage. You dont want to wait until the lease is almost up. Good Luck

Miss Sarah Rae,

Like VHB explained, a lease to own option is a good way for a buyer to get into a home they want to buy while they still work on their credit. Your Realtor can draw up all the standard lease option contracts and can negotiate your down payment and your rent credit. It's important the the option gets recorded on the title of the home, so that the seller can't sell the home to someone else during the option period.

Sandy

From a buyers point of view. Basically you rent or lease a home for about a year and at the end of the lease term you exersize your option to buy the home or move on. Great opertunity for a sub par credit buyer to get into a home and you get a year or so to improve your credit. Usually you put an amount of money down called the option consideration about 3% on average. You should also get a rent credit ( part of the rent payment ) of which the credit and option consideration come off the top of the purchase price.
To cover your self make sure to have a memorendum of option agreement signed between you and the seller. This alerts you if the seller tries to sell out from under you or the house goes into foreclosure.
Have a good real estate Attorney help you. One more thing rent to own is the same thing.
For more information go to the forums at http://www.naked-investor.com this is an excelant site.

Srm,
Basically here in NC you have two contracts a lease and a purchase contract. There is no form for this type of transaction as of yet in NC so we make do. Or a real estate attorney will draw up a contract. Now with the two forms the lease is secondary to the purchase contract. So whenever you can buy move ahead and the lease just ends.
It is a good move for someone that can afford to buy but is credit challenged at that moment.

Now concerns; you must make sure you are fully covered and that there are checks and balances in place to make sure that the owner is making the mortgage payments. Worst case scenario is that you pay them a deposit/option money to lock in the price and then start making rent payments. Say they stop making the mortgage payments. They come to foreclose and you are out of the home and out of all you your money. You can of course sue the owners but, let's face it they defaulted on a mortgage they may not be concerned with you. I strongly suggest that you have your real estate attorney draw up the contract and make sure you can constantly check to see that the payments are being made to the original lien holder. Also make sure there are no 2nd and 3rd liens on the property

Hope this helps,