A Lease Option is a way to purchase real estate where the Buyer leases a property with the option to purchase the property at the end of the lease term. It is an ideal alternative for Buyers who want to buy a home but don’t yet meet lending requirements to do so. If you are a Buyer with BAD or NO CREDIT, that’s OK too! I work with Investors who offer Lease Option properties to Buyers who need a home.
Even though interest rates have dropped to record lows in the past year, other factors, such as Debt-To-Income (DTI) ratio and the 20% minimum down-payment needed to avoid the high cost of Private Mortgage Insurance (PMI), prevent Buyers from purchasing a home. In addition, many lenders may offer products to borrowers with low credit scores or bad credit, but require the borrower to have a higher interest rate, and will charge them additional points for taking on the risk. A Lease Option is a path to homeownership and creating wealth through real estate.
Here are some of the Buyer Benefits of a Lease Option…
Time, Credit, Money: Fortunately, a Lease Option can overcome many of the challenges to homeownership. A Lease Option gives Buyers the time needed to improve their credit, save for the down-payment, and still live in the home that will one day be the one they own.
Credit: Buyers can improve their credit over the lease term so they are ready to get the loan when the Option period arrives. I have a few great mortgage lenders and credit repair companies who can guide Buyers in how to become loan-worthy at the end of their lease term.
Save from Home: Buyers can start feeling like a homeowner right away by living in the home they intend to buy. Whether they save on their own or have an escrow company hold the funds for them, the Buyer can set it and forget so when it’s time to get a loan from a lender, they’ll have money saved for their down-payment to exercise their Option to Purchase.
Low Up-Front Cost: Instead of a down-payment, the Buyer pays an Option Fee of anywhere from 1-10% of their contracted purchase price. That’s a lot less than the 20% to avoid PMI. This Option Fee is credited to the Buyer as long as the Buyer exercises the Option to Purchase and closes the sale after the lease term. The Option Fee is a lot like an Earnest Money Deposit (EMD) in that it gives the Seller the assurance that the Buyer is serious about buying the property. It’s for this reason that the Option Fee is not refundable if the Buyer chooses not to buy the property.
Move in Fast: Since the Buyer doesn’t have to wait to close escrow, they can often move in right away, just like a traditional Lease. But a Buyer should always do an Inspection prior to moving into the property. The appraisal is not done until the Buyer and the Buyer exercises their Option and opens escrow for the purchase. A Buyer can do a Lease Term of as little as one year to as much as five years – plenty of time to try and save and get qualified – it all depends on the Buyers financial needs.
And there are more benefits…
As an Agent, I made a point of finding a way to help Buyers who don’t qualify for a loan now to still get a home now. I reached out to my Investor Buyers, lenders and credit repair companies and with my team, I created a simple to follow Lease Option Program. If you are a Buyer who has Bad Credit, verifiable income, and funds for the Option Fee, a Lease Option may be just right for you! Contact Me today to get started with your Lease Option.