Lease Option- Seasoning Necessary For Refi? - Posted by Darryl

Posted by James Strange on August 25, 2004 at 17:50:45:

Work with another lender!

Some lenders will consider it a refi and let you apply rent creidts.

Call around to a few brokers and find one that counts exersising a lease option as a refi.

That said most will not allow a 100% rent credit. How much they will allow is up to the lender.

Lease Option- Seasoning Necessary For Refi? - Posted by Darryl

Posted by Darryl on August 25, 2004 at 17:16:35:

As a tenant/buyer (t/b), I am about to exercise my option to purchase and I’ve already been preapproved for a loan of 97% of $140K. This house is valued at a/b $155K. The owner had at least $25K in equity and was straining to make the monthly pymts. So we agreed on a price of $152K. I negotiated this l/o deal whereby I receive 100% rent credit for up to 24 mos. @ $900/mo. (I Know… It’s Rare to Get 100% Rent Credit). She desparately needed to downsize & I needed to Upsize, so we swapped homes. She did a straight lease from me and I lease her larger house with the option to purchase. I’m now in my 20th month, I have $18K in rent credits, and I’m ready to exercise my option. The problem is that I don’t have the 3% (or $4-5K for dwnpymt and closing costs. I entered this deal thinking that my rent credits would cover my downpymt and closing costs. And with the house being worth $155K that WOULD be the case IF this were refi, BUT according to the bank (that has already preapproved me), this l/o arrangement doesn’t qualify for a refi. My best guess for a solution: Get the owner to agree to execute a land sale contract??? or contract for deed???, let it season for (?) months, and then I’d be qualified for a refi??? Does this make sense or does anyone have any suggestions? Where are ya Option-King?!!
The clock is ticking on me, as my loan MUST close by Mid-October. :-?

Re: Lease Option- Seasoning Necessary For Refi? - Posted by GMann

Posted by GMann on August 26, 2004 at 22:16:28:

I would re-negotiate the purchase price with her. You now have an option @ $134K (152K-18K rent credits). I would offer 137K-138K with her paying all of the closing costs ($3000-4000 or whatever it is).

I would do this as a 100% PURCHASE (not lease purchase) and the seller paying allowable closing costs. You will only have pro-rated taxes/interest and insurance out of pocket.

What puzzles me is the 97% approval…? It’s either an FHA loan or a company that has limited programs. If it’s FHA, you can re-negotiate and the Seller can gift you the down-payment from their equity thru a non-profit org. (your loan officer will know what this is). You would re-nego. with the seller to pay closing costs in this scenario also by raising the sale price. The seller gifting you the down payment usually doesn’t jive with a non-FHA loan, but the seller paying closing costs usually does.

If your mortgage company doesn’t have a decent 100% program with no PMI (mortgage insurance) then go to the Yellow Pages and find one that does.

DO THIS AS A PURCHASE AND WRITE A NEW CONTRACT!!! The companies with good rates on 100% probably won’t allow rent credits above market rents. And yes, they will get a rent survey from the appraiser.

Re: Lease Option- Seasoning Necessary For Refi? - Posted by Jesse

Posted by Jesse on August 26, 2004 at 01:29:24:

I know that alot of lender count 12 months on a L/O to do a refinance. Check with subprime lenders as they are more creative the most tradional lenders.