In today property market, you might heard people said a lot about purchase home with lease option. If you are an existing property investor, this strategy may not strange to you while if you are newbies, what do you know about this strategy actually working?
Whether you are existing property investors who going to purchase your next property by applying lease with option or the newbies who trying to use this strategy to purchase their first property. Perhaps you have do the research regarding the lease with option. But today, we are going to remind you again the pros and cons of of lease with option to buy a property;
👍 It helps buyers with no down payment to build up a down payment while still enjoying the comforts of being in a house with land.
👍 If agreed upon by the owner, you can make changes and improvements to the property but still have large maintenance issues covered by the landlord.
👍 You can get to know the neighborhood and neighbors before signing the dotted line for ownership. I am sure some of you can attest to buying a house, then realizing that the neighborhood wasn’t as safe as you thought it was or your neighbors turned out to weirdos.
👍 It will be very easy to document your prompt rental payment history to a mortgage lender if they need additional documentation to help you qualify for a loan. Sometimes, those with damaged credit, foreclosures, or bankruptcys on their credit can receive approval for a mortgage if they can prove steady, substantial income coming in and a flawless two or three year history of rental payments.
👎 Generally, lease-to-own house agreements will come at a premium price. Generally, a landlord will draw up a lease that will include a portion of the rent that goes to the landlord and a portion that will go towards your down payment. The landlord should offer the fair market value for another rental house of that size in the area, plus whatever extra you want to pay on top of that to go towards your down payment. However, some landlords will try to ask for more rent than what is normally considered “fair market” for that area, which means your paying more in order to save towards a down payment with no interest.
👎 You might decide that you don’t want the house, and then your stuck in a lease with possible penalties for not buying it.
👎 The Federal Housing Administration limits the amount of rent that you can apply towards a down payment if you look to buy an FHA loan. With conventional mortgage loans for a bank, there are no restrictions or limits other than what is agreed upon in the lease agreement.
Here is our advice, if you have found the property that in your price range, do ask the landlord whether they willing to accept the deal of lease-to-own. It is to make sure that they’re agree to working with you on the agreement’s terms. However, if you feel bad of the deal, do discuss with your solicitor or stop the buying process right away. (always believe your intuition) It is to prevent yourself from any legal issues.