The decision of whether to do a lease-option versus rent is more a matter of one's taste, timing, resources, and 5-10 year outlook. In a way, one can view a lease-option as rent++ or "try before you buy" housing. One has a lease in either case; however, the key difference between the 2 is that the lease-option also gives the tenant/buyer the opportunity to purchase that property at a specific price (that's locked in for a certain amount of time). Of course, that opportunity to lock the price doesn't come for free--hence the option fee.
If you could see yourself living in that TH for at least another 3-5 years, then the lease-option might be better for you--especially if you also have enough to cover the option fee, first and last months rent, and the security deposit. Also, prepare to pay an additional amount per month (aka a rent premium) that will be applied towards the balance along with the option fee--provided you exercise that option. On the other hand, if you only see yourself living in that TH for 1 year or less, or if you can't afford the rent premium and option fee, then you should rent instead.
There are many questions you need to look at such as your ability to make the payment, is this your primary residence, and your feelings about the area where located, do you like the home owner associaiton rules and regs? In our market, single family homes generally sell faster than a townhouse. With the aging boomer population and the desire to "downsize" I beleive townhouses will get more desirable. Renting can be the best option if you need to improve your credit, have uncertainty about your ability to make mortgage payments or do not want the responsibilities of home ownership (it is work). In a recent article I read, 75% of lease options don't end up closing...if you feel unsure, you may want to conduct a lease/option or simply rent. On the rental side, this market is beginning to soften because many people cannot sell their home and are turning to leasing them out - however based on the number of short sales and foreclosures - more peolple will become renters because of their fiscal situation. It is a good time to be a buyer, this is a buyers market.
Bottom line, it's a good time to buy (low interest rates, price reductions) is the payment sustainable?
Buying in any market after evaluating the above values is wise. Investigate financing with a 30-year fixed rate mortgage first. With mortgage rates still very affordable, this is your best option if you plan to live in the townhouse 5 - 7 years.
Select a Buyer's Agent who is familar with the area. Their exertise will save your $$$$ in avoiding costly mistakes.