What is an option-to-purchase agreement?

An option-to-purchase agreement lets renters pay a fee for the right to purchase the property in the future. In the case of a rental house, the owners often set aside this fee and apply it to the downpayment if the renters choose to purchase the home, according to Bankrate.

An option-to-purchase agreement locks in the sale price and gives renters a chance to rehabilitate their credit while they live in the house they wish to purchase. The agreements are typically only a good investment for renters who are certain they can qualify for a mortgage when the option period ends, states Bankrate.