Posted by JamesL on February 19, 2002 at 18:09:00:
Try telling the seller this. You will give him $1500 down as Non-refundable Option Consideration. You will pay him 525/mo rent, as long as $100 of that is credited to you as a Down Payment should you excersize your option to purchase. That wording will work out better for you because after 36 months of renting the property, you will have paid $3600 already to the seller as a downpayment. Changing the wording of your agreement will still work out fine for the seller because if you choose not to buy, he gets to keep everything you have paid him. Be certain that you have the selling price of $55,000 written in the option , and (without necessarily telling the seller) you should quietly record a copy of your option at your county courthouse within a few days of moving in. If the house is liveable right now, it sounds like a potentially great deal for you and your family. Also, even if you have bad credit, you should be able to obtain financing from a mortgage company after leasing for 24 or 36 months. Just keep a photocopy of each check paid to the landlord, always pay on time, and be sure to keep fixing up the house. After 24 or 36 months, the value of the property will presumably have risen, your price is already locked in @ 55k, so it might be worth around 58k. You will only be borrowing around $35,000 (32,500 + closing costs, etc. minus downpayment already given to seller). That is less than 65% LTV.
As long as your credit score is over 535, you should get a loan without too much trouble. If this is happening too easily, you might want to negotiate with the seller before you sign to increase the amount of rent he credits toward your downpayment. Even an extra $25/mo will add $900 at the end of 36 mos! Maybe $50 extra??? Maybe $10 extra?? See what you can do.