Lease Option

The basic idea of a lease option is that the home buyer is unable or un-willing to get traditional bank financing. This allows us, the property owner, to finance the property for you.

The financing structure of a “Lease option” agreement typically has three parts:

• A Non-Refundable down payment. Can be less than or equivalent to a standard down payment (20%). The amount depends on a few factors, including your credit worthiness, monthly payment and agreed purchase price.
• The monthly payment. This is determined based on a review of your finances. It is important that we determine together what you are able to afford based on a realistic look at your finances. There are specific laws (Dodd-Frank) that protect borrowers from predatory lending. We typically use a third party mortgage vendor to review the numbers to make sure the payments are fair.
• The purchase price. Based upon the purchase price and the monthly payment we can determine what the duration of the financing will be.

All of the above factors are negotiated on a per deal basis.

What are the benefits to a home buyer with Lease Option?

• Controlled Monthly Payments
• Typically lower than normal down payments
• No Bank Qualifying. Our criteria is less strict than banks. This does not mean we are negligent, simply flexible.
• Exit Flexibility. If you decide that this home is not one you are interested in owning, you call us up and we discuss how to terminate the agreement. All of this exit information is in the agreement we sign.

What else do I need to know?
Keep in mind, that just like a bank, our down payments are non-refundable.
We often use a Non Refundable Option Consideration. This is essentially like the interest from a bank loan. This part of the monthly payment does not reduce your principal loan, similar to interest on a traditional loan.

With Lease Option, the Seller (US) is still responsible for paying taxes, rental property insurance, etc. It is important for the buyer to consider whether these costs are part of the Lease Option agreement or not.

Posted by Kirt

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