A method of financing in which a person leases the house from a lender with an option to buy.

A method of financing in which a tenant has the option to buy a property after a specified period of time.

A lease-option is something of which syndicated real estate columnist Robert J. Bruss is a big fan. A property that you can lease with an option to purchase at a later date has a lease-option contract. These contracts usually require an up-front payment (called "option consideration") to secure the purchase option. The consideration is usually credited toward your down payment when you exercise your option to buy the home. An important factor in a lease-option agreement is what portion of the monthly rent payments (typically one-third) is applied toward the purchase price if you buy. You'll usually pay a slightly higher rent because of the lease-option privilege.

A lease-option (or lease purchase) is often associated with a real estate transaction primarily consisting of two components: a lease agreement and a purchase option agreement. The two documents work in tandem to create the overall effect for tenants to have legal use and possession while keeping their position to receive transfer title. There are two ways this may be achieved: by qualifying for a new loan so that the lanlord/seller may be bought out or by creating a contract that allows the renter to lock in the purchase price for several years.