(1) you put down a deposit(usually 10% of purchase, price,but negotiable)
(2) you agree to purchase the house within a certain period of time(usually 1 year,but again negotiable)
(3) you pay a rent which must be above market rate
(4)The deposit and extra funds are put into an escrow account which is used to build up your down payment
(5)At the end of the lease period you take your escrow funds and go to a conventional lender to obtain financing
(6) if you do not purchase,you forfeit your escrow funds
of course,the terms can vary from situation depending on what you negotiate with the seller. You should realize that this is usually more expensive in the short run than just renting or a straight purchase. this can be tricky & you can stand to lose a lot of money if things do not work out. if you are planning to go this route,you really need to work with an experienced agent who can negotiate the best terms for you & look out for your interests. This option is best for people with good income but poor credit.i
One is a lease/option,
The second is a lease/purchase
The biggest difference between the two is that with a lease option, you have the OPTION to purchase at the end of your lease term.
With a lease purchase, you must purchase the home.
The leases are written up differently.
One of the downfalls can be for a tenant, that in a down market (check to see what your specific local market is doing and where the predictions are as to where it is going) by the time you purchase, the house may not be worth the price you set when you signed the lease. Therefore, the bank will not loan you the $$$.