The key word on lease purchase and lease option sales is flexibility. Most items are a point of negotiation. We structure lease option, lease purchase transactions using a standard sales contract and a standard lease.
The price, terms and closing date of the purchase are set on the sales contract as with any sale. The only difference is that the closing date is set no more than six months to a year in the future. The Tenant-Buyer then rents the property until they are able to acquire the financing to purchase.
The advantages to the Tenant-Buyer are;

-The sales price is locked in at today’s price, not the higher price at the time of closing.

-The tenant has time to work through financing problems such as time in a new job or clearing blemishes from their credit history.

-Tenant-Buyers who must sell another property before they can purchase another have time to do so and can avoid having to bear the  expense, time and turmoil of moving twice.

What is the difference between a lease option and a lease purchase?
Under a LEASE OPTION the Tenant-Buyer has the OPTION to purchase but is not obligated to purchase. Since the Tenant-Buyer is not committing to a purchase, Seller is usually not willing to negotiate as much as in a lease purchase.
Under a LEASE PURCHASE the Tenant-Buyer makes a commitment to purchase and Seller makes the commitment to sell at the price, terms and time agreed on. Under a lease purchase the Seller has more incentive to negotiate.
Does the rent or any part of the rent apply to the purchase?
Most sellers cannot afford to have a large portion of the rent apply to the purchase. They have a mortgage, taxes, insurance, maintenance and other expenses associated with the house. Asking that the rent apply to the purchase is actually asking to live rent free until the purchase.

As mentioned before flexibility and negotiation are normal and we have had some cases where a portion of the rent was applied towards the purchase. In those cases we must structure the agreement in a way that doesn’t concern the Tenant-Buyer‘s lender.

Most lenders will not allow rents paid to be credited to the borrower. They are concerned with the potential for fraud. Lenders do allow the Seller to pay closing costs and pre-paid costs for the Buyer. We have successfully structured sales where a portion of the rent was applied to closing costs and pre-paid costs which were paid by the Seller for the Tenant-Buyer .
What if the Tenant-Buyer does not buy the property at the lend of the lease purchase or lease option?
The Seller has two ways to recover his losses. In most lease purchase, lease option agreements the Tenant-Buyer is required to pay a non refundable earnest money. This non-refundable earnest money can be a substantial amount. It is not unusual for it to be several thousand dollars.
In most of our transactions we try to make it easier for the Tenant-Buyer by having a modest earnest money. In some cases the earnest money was equal to one months rent. On rare occasion (when the Tenant-Buyer had excellent credit and references) we have let the security deposit under the lease serve the dual purpose of security deposit and non-refundable earnest money.

The Seller also has the option to sue for damages from a breach of contract.

How does the Tenant-Buyer qualify for the lease purchase or lease option?

We have two separate contracts, the sales contract and the lease. The Tenant-Buyer must meet the basic qualifications of both.

Under the sales contract, we require that the Tenant-Buyer have a loan pre-approval from a trusted lender, even if that pre-approval is conditional . We call the lender and verify that the Tenant-Buyer will, in all likelihood, be able to get funding to purchase the property within the contract period.
Within the mortgage industry there are a few individuals and companies who are less than honest. The current national economic downturn was caused in part by less than honest loan originators who made too many loans to buyers who could not repay the loans.
We do require that the loan pre-approval be from a trusted lender.
Under the lease, the Tenant-Buyer must submit a rental application and be screened as would any tenant. The screening includes a credit and public records check (which includes criminal records), verification of income and employment, checking previous rental history and checking references.
Again, everything is negotiable as long as we are able to reach an agreement that is fair to both the Tenant-Buyer and the Seller while not concerning the lender.