What option allows home buyers to lease a property with the potential to buy it later?

The concept that allows home buyers to lease a property with the potential to buy it later is referred to as a lease option. In a lease option agreement, the tenant has the right, but not the obligation, to purchase the property at a specified price within a certain timeframe. This arrangement provides flexibility for buyers who may need time to save for a down payment or improve their credit score before securing a mortgage.

While "rent-to-own" might seem similar and is often used interchangeably with lease option in casual conversation, it can have varying definitions and may not provide as clear a distinction regarding the formal right to purchase under specific terms. A straightforward lease agreement typically does not include the option to buy, while an installment purchase refers to a structured payment plan for ownership which is distinct from leasing. Thus, the lease option is the most precise term that encapsulates the arrangement described in the question.