In our efforts to continue helping sellers who think they can’t sell and buyers who think they can’t buy, we have a new option for buyers and renters who are not currently able to qualify for a new mortgage. If you cannot qualify for a loan because you have a low credit score or are not able to obtain a mortgage because of a bankruptcy or short sale, a quality lease to own option might work for you.
The best part about this program is you, the future buyer, get to pick out the house. The lessor then buys the house and enters into a a lease to own agreement with you, the future buyer.
Here are the program basics.
- Lease with option to purchase, not a loan
- You have up to 4 years to get financing and can buy anytime after 12 months
- Single family homes only
- Minimum $5000 gross family income typically required
- 3% down payment, credited back when purchase is completed
- 3% Homeowner Fee
- Security Deposit equal to one month’s rent, credited back when purchase is completed
- Rent Equity payment of 10% of monthly rent, credited back when purchase is completed
- Combined rent and rent equity payment is 1% of lessor’s acquisition cost
Lessor Acquisition Cost: $180,000
Buyer’s Purchase Price: $198,000 (Lessor’s purchase price is increased by 10% for the first year and another 2% each additional year. This is the amount of the buyer’s future purchase price)
Down Payment: $5,400 (Down payment is 3% of the acquisition cost or a minimum of $4,500 of which 100% is credited to buyer when you purchase)
Homeowner Fee: $5,900 (Homeowner fee of 3% of the acquisition cost or a minimum of $5,900. The homeowner fee and down payment are due when lessor goes into contract on buyer’s home)
Security Deposit: $1,620 (Total monthly payment consists of Rent – $1,620 – plus Rent Equity – $180 – plus any normal homeowner expenses such as property tax, insurance, sewer, garbage and HOA)
Rent Equity: $180 (Rent Equity acts as a savings account to ensure you have enough money to purchase the property. 100% is credit to the home buyer when they purchase)
Total monthly payments are 1% of the acquisition cost, in this case $1,800 per month.
Here’s how this amortizes over the four year lease to own option contract.
Month Buyer’s Purchase Price Total Credits to Home Buyer Buyer Net Purchase Price
12 $198,000 $8,060 $189,940
24 $201,960 $10,220 $191,740
36 $210,119 $16,160 $193,959
Remember, the best thing about this program is that you get to pick out the home you want and then buy it in 12 to 48 months.
If you think this program is right for you or if you know someone who might benefit from it, contact us.