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Rent To Own
Lease Options

The Lease Option or Rent-To-Own program is just another tool to purchase a home. It allows a buyer to get started on home ownership with  a low initial investment.  It provides the buyer an opportunity to build a down-payment over time while locking in the house and price right now,  This is accomplished by having a portion of the monthly rent go towards the down-payment.

Lease-Options save time and expenses in the beginning as they do not require bank approval or require the buyer to go through or qualify through the lender's loan process.  No bank fees are required to do the initial steps in a Lease-Option

For buyer with no or blemished credit the Lease-Option period allows time for the buyer to establish credit or repair damaged credit thus saving large sums of money buy qualifying for a better interest rate and ending up with lover monthly payments

The buyer should speak with a lender or mortgage broker to determine what type of loan they might qualify for and what they need to do to qualify for the best loan at the end of the Lease-Option period. Carrying out the needed steps are then the responsibility of the new buyer.

Rent-To-Own programs typically require a Lease-Option Deposit of several thousands of dollars as a guarantee that the buyer will purchase the home at the end of the Lease-Option period.  Should the buyer not complete the purchase for whatever the reason the deposit is lost.  If the buyer exercises the Option-To-Purchase the deposit is credited toward the down payment. The amount of the deposit is determined by the amount of down-payment the buyer will need to have to get the loan they are interested in.  At the end of the Lease-Option period the Deposit plus the rent credit plus what ever additional monies the buyer will be able to supply will need to meet  the lenders down payment requirement.

The monthly rent will usually be higher than just a normal rent to allow a portion of it to be credited towards the down-payment.  The price of the house might be slightly higher than what it would sell for now since the owner has to wait for his money and may end up starting over.

Repairs are often the responsibility of the tenant-buyer and should be carefully spelled out in the contracts as should be items covering new furnaces or roofs or other major expenses. My suggestions for items like furnace or AC replacement is the sellers has them done and pays for them up front and the cost is added to the price of the house.  The new owner will get the benefit of the new items and not have any large sum to pay reducing the amount they will have for the down-payment.

There are risks for the buyer in that if they do not exercise their option the deposit and additional amount they paid in rents will be lost to the seller and both parties now have to start over.  A Lease-Option can be a good deal for the disciplined buyer looking to save money.

 

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