Lease Purchase vs. Lease Option vs. Owner Financing

	Lease Purchase	Lease Purchase Option	Owner Financing
Definition	Buyer signs lease for certain # of years and also signs contract to purchase home after lease is up.	Buyer signs lease for certain  # of years and also signs option to purchase, but does not have to buy at end of lease	Seller provides financing to buyer for the purchase. If seller has mortgage, they would have to pay off mortgage before this option was viable.
Terms of Contract	Lease: Rent & Terms Negotiable Sales Contract: Closing set for date after lease expires, but ties both buyer & seller to sale of home	Lease Signed: Rent & Terms Negotiable Option to Buy: Sets general terms for Buyer if they choose to purchase home after lease expires	Sales Contract: Price & Terms Negotiable Note/Deed of Trust between Seller (Lender) and Buyer (Borrower)
Lender of Funds	3rd Party Lender (Bank, etc.)	3rd Party Lender (Bank, etc.)	Seller
Length of Contract	1-3 years	1-3 years	30-60 days
Purchase happens	At end of lease	Possibly, at end of lease	Date of closing, usually 30-60 days
Money Down	Security Deposit (one month's rent)  + Earnest Money for Contract ($1,000 -10% down)	Deposit for Option ($500-$2,000) + Security Deposit (one month's rent)	Depending on Seller requirements (normally 10%-20% of Purchase Price)
Maintenance of Property	Landlord/Owner	Landlord/Owner	Tenant/Buyer
Taxes & Insurance	Landlord/Owner	Landlord/Owner	Tenant/Buyer
Utilities	Tenant/Buyer	Tenant/Buyer	Tenant/Buyer
Benefits for Seller	1. Income from Lease Payments 2. Guaranteed Sale at end of Lease	1. Income from Lease Payments 2. Possibility of Sale at end of Lease	1. Transfer of ownership 2. Not responsible for maint/taxes, etc. 3. Income from Mortgage Payments
Benefits for Buyer	1. Allows time to qualify for loan 2. May be able to build down payment from lease payments 3. Guarantees home will not sell to someone else	1. Not tied in to purchase in case of loan denial, market downturn, relocation, etc. 2. Allows time to qualify for loan 3. Secures purchase terms with a lower down payment	1. May not have traditional lending guidelines for loan 2. Buyer OWNS home & can make upgrades/repairs 3. All payments are mortgage payments-apply to Principal & Interest
Drawbacks for Seller	1. Responsible for any maintenance 2. Buyer may not qualify for loan at end of lease 3. Risk involved if Buyer does not make payments	1. Responsible for any maintenance 2. Buyer may not qualify for loan at end of lease 3. Risk involved if Buyer does not make payments 4. Buyer not locked in to purchase	1. Buyer may not maintain property 2. Buyer may not make payments which force Seller to Foreclose (more expensive process than tenant eviction) 3. Still carry debt on home
Drawbacks for Buyer	1. Rent payments may not be applied to down payment 2. Cannot make any upgrades to home (unless agreed upon by seller)	1. Rent payments will not be applied to down payment 2. Cannot make any upgrades to home (unless agreed upon by seller)	1. Make payments to seller, which will probably not report to credit agency