buying excersing my lease purchase - Posted by Bob Mo

Posted by JohnBoy on November 02, 1998 at 19:22:42:

It sounds like you need a different lender to work with. Is this a direct lender as in a bank? Or is this a loan broker your dealing with? If its a bank, try another one or if its a loan broker get a another one.

They’re a lot of lenders out there that will treat a l/o as a refinance instead of a purchase. The option consideration would apply as a down payment. No seller in there right mind unless they don’t have any knowledge in structuring lease options would show the option consideration as “Pre-paid down payment”. What happens if the tenant couldn’t get the financing or decided not to exercise the option? The seller could end up having to give the option money back since it said pre-down payment instead of “Non-refundable option consideration”. The option consideration is not considered a down payment but rather a fee for locking in a pre-set sale price and tying up the property for a year or longer. If the value in the property was to go up you as the tenant would get that equity as long as you exercised the option. Thats the fee you pay to the seller for locking you in on the price, not a down payment.

However, “MOST” lenders will allow that as part of the down payment when a tenant exercises the option. “Most” lenders will consider a l/o as refinancing the property the same as they do when you buy on a contract for deed. A lot of lenders will restrict the amount of the rent credits to the amount of rent paid above the market rents in the area.

You could try having the seller write up the $7800 in rent credits as a repair allowance instead of saying its a rent credit. Tell the lender you want to use the repair allowance as sweat equity. That may work better for you. If you have a problem with this lender just find another one. Try using a loan broker that has a lot of different lenders to choose from. This will save you a lot of time and frustration from jumping from one bank to the next. The loan broker will shop your loan for you and you won’t end up with a bunch of inquiries on your credit report from you going to a lot of different banks.

buying excersing my lease purchase - Posted by Bob Mo

Posted by Bob Mo on November 02, 1998 at 13:09:45:

Just found this site a few weeks ago . unbeleavable amount of information.
I have a question reagrding my own lease purchase.
we will be excesing the option in the next 90 days,
we really just fell in to this house the owner s transfered and had been caring this morgage for aprox 11 months along with the their new home.

the terms are
124,000 ( was listed for 127,500) similar homes in the last 6 months have sold 129,500, 131,500, 129,000.
I gave $2500 in option money
rent $1000/ mth w/ $650 rent credit (7800 rent credit at end of term)
seller will also pay $1500 at closing

I have talk with a lender and I have a few question on what to do?
The area we live rents are $900 to$1000 for the 3brn 2 bth home like ours, the bank has told me most of our rent credit will be a wash due to that. also the closing payments from the seller can not be used for prepaids? my question is sould I have the purchase price of the house reduced by the amount of rent credit and closing cost credit? We pay the closing cost?
The seller and my self have talked about this and they will do what ever we need.
the lender also siad we need to have the option money of $2500 to be listed in the contract has a prepaid down payment?
Also we were going to put 5% down based on the 124.000 price. do all of these things sound right to any of you?

thanks for your in put and insight

Re: buying excersing my lease purchase - Posted by John OH

Posted by John OH on November 04, 1998 at 03:04:56:

First, I would get away from that bank and find a GOOD mortgage broker. Try to get a referral from somebody that recently had a good experience in refinancing. A good broker will have answers to all your questions and do what’s in your best interest.

Some of those things you mention, such as how much of your deposit and rent credit go to down payment are not clear-cut. They depend somewhat on the paperwork you have and can create, but you won’t know exactly what you need until you get the broker. Bank people only know the set of rules they are given, and don’t comprehend flexibility.

One last thought - you’ll get a ton of good advice on your what to do from this site, but to take that knowledge and make a stranger write a mortgage according to what you learn here is impossible. Find the right guy.