A lease option is a contract that gives a tenant the right to buy a home at a certain price within a certain time. The owner of the house might request a payment to purchase the option. The owner might charge more monthly rent than he would if the tenant did not have an option to buy. The extra rent might be used to pay off the option or go toward the down payment or both.

If the tenant doesn’t buy the house, he usually forfeits the extra money he has paid, unless specified otherwise in writing.

Every lease-option is different and the landlord and tenant should carefully negotiate terms and costs, including who will pay closing costs. Both parties should sign an option to buy contract, which accompanies the normal lease agreement. You can get these contracts at a local real estate firm or on the Internet, but it’s best to get one for your state. Here is a sample contract: http://www.ilrg.com/forms/lease-to-purchase.html