Assists low- to moderate-income homebuyers in purchasing a home by allowing them to lease a home with an option to buy; the rent payment is made up of the monthly rental payment plus an additional amount that is credited to an account for use as a down payment.

To be more clear, if a buyer enters into a lease purchase contract today for an agreed upon price of $100,000 (the current value of the home today) and then the property appreciates to $110,000 during the 12 month lease, the borrower can use the new appraised value of the home (110k)to qualify for a loan, often times lowering the loan-to-value and decreasing the rate.

Many lenders allow the borrower to show only 12 months of on time payments by cancelled checks to refinance the home into their name. Using this method there is normally no down payment required because the equity of the home can be used to include all closing costs in the transaction. The only fee out of pocket for the borrower in a lease option may be the appraisal fee.

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