Basically it works like this, You place a nonrefundable deposit with the seller(usually 10%) You sign an agree ment to purchase within a certain time period(usually 12 Mos.) you pay a rent that is above market value and the extra amount is placed into an escrow account. At the end of the term,you take your deposit & escrow out & this is your down payment. you go to a lender,get financed and purchase the house as you would in any other cricumstances.If you do not go through with the purchase you forfeit this money. Also,you are locked in at the purchase price you agreed upon in the beginning,so should the house go down in value during this time,you would still be committed to the original price.