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What is a lease option for renting/mortgage?
I've just asked a Q about having bad credit and wanting to get a mortgage, some one answered and said i could ask the landlord for a lease option, could some one explain what this is pls? Also said to get the landlord to give me first right of refusal, well shes a very nice landlord and has already said she would love it if we could just buy it off her as she knows how much we love the house :) xx
Public Comments
- This is how it works. Usually you pay an "option fee", this is like a down payment that would go towards the purchase price of the home once you obtain financing. Your landlord may even be willing to convert the deposit you paid in the beginning into the option fee. However, if you don't end up buying the home in the end (whether it is because you couldn't get a mortgage loan or because you didn't like the house, etc.) you would lose your option fee. Often the owner will also charge a bit extra for the lease, this extra would work the same way. It would go towards the purchase price and lost if you don't end up buying the house. Why can these plans be beneficial for some people? It gives you time to prepare yourself for home-ownership. Most people that do these are trying to reestablish their credit scores. Giving yourself a year or two would not only give you that time to improve it, but you are also proving to a mortgage lender that you have been responsibily paying the rent (should be what the mortgage payment will be) on the house you will be purchasing. It is also an advantage to the buyer because you lock in the purchase rate at today's prices, even if the prices of homes goes up. You should ABSOLUTELY talk to a mortgage lender before doing anything to see how far away you are realistically from being able to purchase this home. The advantage to the seller is finding someone to purchase their home that will take care of it like a homeowner. Usually the contract states that the "buyer" will take care of any minor problems with the home. Plus, they aren't having to worry about making the mortgage payments while the house sits empty. Hope this helps! If you have any other questions, please let me know
