Now that you have decided to buy a home, there is a method of purchase that could work well for you. Taking advantage of a lease option to buy could be the best way for your current situation if you have a credit rating or history that is no longer acceptable to the mortgage banks, or you have been transferred due to employment requirements and are not familiar with the new location. There are varieties of reasons that a buyer may consider the lease option to buy a home. In turn, there are also a few reasons that a seller may consider this route and it has the potential to benefit both the buyer and seller.
The term lease option or rent-to-own is where the occupant becomes a renter making monthly payments to live in the home with a certain negotiated percentage of each payment going towards a down payment, or towards equity in the home. When the length of the lease is completed, usually after one to three years, the renter has the option to purchase the property or walk away. Do not confuse this with lease to purchase as this requires the renter to purchase the home at the end of the lease.
Advantages to participating in a lease option with a seller can bring relief to a struggling buyer. If you are in a position where you do not qualify for a mortgage loan, or you do not have enough savings to put towards a down payment there may be a seller willing to work with you. Or perhaps a new area has your interest but you desire a closer review of the local school system and or neighborhood to ensure that it is a good fit for your growing family. Additionally you have the advantage of being able to lock in the purchase price at the time your lease contract is signed. The ability to rebuild a less than perfect credit report or save some money is desirable to many prospective homeowners. Remember that percentage of the rent that is being set aside each month towards a down payment? If you do decide to purchase this will be yours to use but if you decide that you do not want to purchase the home you will lose most if not all of that money.
The seller also has an advantage in that they are able to generate income by having occupants live in the home. It is not uncommon for a home to sit on the market after the seller has purchased another home. Being responsible for two mortgages can be very stressful. Given the current nature of the housing market, there may be fewer sellers in your area who are offering a lease option to buy deal. Knowing the trends in the desired area will help you with your negotiations in working with a seller. Additionally an advantage would be if the occupant decides not to buy you will have most if not all of the dollars submitted for down payment accumulations as well as your option fee.
Since there are varying protocols from state to state, and even county to county, as well as negotiations and written contracts involved you are better off having a real estate agent on your side. A knowledgeable agent in a ‘lease option to buy’ transaction will work closely with you to ensure that the written contract is not putting you at a disadvantage. From negotiating your option fee, monthly payments, and final price, an agent will be on your side. When entering into a lease option to buy you must read all the fine print. If one area of the contract is not followed it could cause you to negate or be in breach of the contract. A real estate attorney would bring peace of mind if you have them review the contract prior to signing. In all there are some major ‘must do’ items if you are looking for a lease option to buy: know the market area, use the service of a licensed real estate agent, have the property inspected, negotiate terms, and follow the contract. Finally as with any major transaction, consistently maintain current and accurate records. Everything from your payments to repairs and even maintenance costs should be recorded. This protects you and provides stronger qualifications when applying for a loan, as well as documented proof that you followed the lease contract.
For more interesting information and household tips, stay tuned to this blog. For more information about buying or selling your home, or to see current homes in your area, visithttps://www.bidselect.com. Don’t forget to join our online community by connecting with us on Facebook and Twitter.
via:http://blog.bidselect.com/2013/12/12/lease-option-to-buy-a-home/
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