Advantages to a buyer using the
Lease with Option to Purchase Program
What is the Lease with Option to Purchase Program? Essentially it is a property rental lease agreement for a specified amount of time (usually one year or more) and then a separate Contract for Option agreement which states the terms of obtaining the right to buy the property. Both of these agreements, when combined together, form a powerful controlling position for the tenant who wants to buy, but for any number of reasons may not be able to (or chooses not to) right now. Some families like to use options to “try before they buy” in a community. The option is just that - - an option, and not an obligation to buy the property. Options are used everyday in our world, in many different ways, from buying vehicles, to buy stocks, to purchasing multi-million dollar commercial properties and businesses.
This program may be the most exciting way for a prospective home buyer to get into their dream home now, and begin the road to ownership. The following list
Provides just some of the reasons why this program is so advantageous and powerful:
- A new tenant-buyer can get into their home right away, today, without going through a complete lender financing pre-approval process and large down payment. Some pre-qualifying and a routine credit check with an established reporting agency is required but not much more than applying for a lease. The purpose of pre-qualifying is to make sure that the tenant- buyer will be able to purchase the property at some point in time during the lease period. If during this step, it is determined that a prospect just will not qualify with any reasonable effort in a determinable time period, then they are informed of this prior to entering into this type of agreement so nothing is lost.
- The new home tenant-buyer is locking in sales price for one whole year at today’s purchase price. This creates a controlling position for the tenant- buyer with begins the “home owner” advantage over just renting. The Option Down Payment money, paid up front, locks-in the price for 1 year. The Option Down Payment is credited towards the purchase price when the tenant-buyer executes their option to buy. It is also important to note that this money is considered non-refundable, should the tenant buyer decide not to purchase their own financing, an extension to the Contract for Option can be negotiated.
- The tenant-buyer receives a portion of the monthly lease payment as a credit which counts towards the purchase price of the home. This is why lease option rents are somewhat higher than normal rental payments. However, the tenant is building up equity in their home at a rate typically higher than they would have if they had purchased the property outright using conventional financing.
- This program works well for many people who many have something in their credit background which needs to be cleared up, or too much current debt that needs paying down before they can fully qualify for a home loan. Many people use the first year under a lease with option-to-buy to work on their credit or personal debt and greatly improve their loan qualification profile, and position themselves for a better mortgage product.
- Most lenders consider lease option buyers as having established a consistent payment record over the first year or so, and will actually make a loan based on the documented Option Down Payment, lease payment history, and their own financing, it is more like a “refinance” type of qualifying
procedure, rather than a “new” loan because they have already shown they are capable of making mortgage payments for those families working on their credit rating.
- The terms of a lease with an option-to-buy are documented up front and there are no surprises. Everything is fixed and as long as the tenant-buyer works hard at making their lease payments on time, they receive the monthly rental credit and are moving toward the ownership goal.
In summary, this is perhaps the best program available anywhere, for individuals or families to get their piece of the American dream – a beautiful home in a great community! We hope you or someone you know can benefit from this program and take advantage of it. |