WHAT'S THE DIFFERENCE?
What is the difference between a lease-purchase, lease-option and rent-to-own program?
"Rent-to-own" is a generic term which may be applied to either of the other two programs. The difference between a "lease-purchase" and "lease-option" are legal in nature. Often, because of the way they are actually implemented, the difference is in name only.
"Lease-purchase" describes the process whereby you are promising to buy a particular piece of property within a certain time-frame, generally at a price determined beforehand. Occasionally, the process for determining the future price is agreed to between the buyer and seller and will be implemented at some future date. An example is where a future price will be determined by an independent, licensed real estate appraiser, paid for by either party or jointly, before the expiration of the lease period. Since a lease-purchase is a promise to buy failure to complete the terms of the agreement leaves you open to legal action.
"Lease-option" or "Rent to Own" describes the process whereby you are only buying the right to buy a home at some time in the future at a given price (or again, at a price to be determined). With a lease option you are under no legal obligation to buy the property ("exercise your option") if you determine that doing so is not in your best interest.
"What does it cost to get into a home under a rent-to-own program?" Under either program there is an initial payment of money to the seller ("earnest money" or, under a lease option, "option consideration"), usually in an amount greater than the normal security deposit and may be in lieu of a security deposit. Option consideration is not refundable if you don't exercise the option to buy - remember, you're only buying the right to buy the house - but is considered part of the down payment if you buy and close on the property. Earnest money, under a lease-purchase may or may not be refundable (usually not) if you fail to qualify for financing or are otherwise not able to buy the home during the course of the lease. Earnest money is also considered to be part of the down payment or a reduction in purchase price that may be required by the seller or lender at closing.
"Does a rent-to-own program help me if I have poor credit?" A rent-to-own program helps you get into a home today, while providing time to improve your credit to eventually purchase. You will be required to apply for and obtain new bank financing at some point during the course of the lease.
We strongly encourage that you to talk to a mortgage company of our choice (because we know them and, through experience, trust them) before proceeding. The mortgage company, within the limits of their ability to forsee the future, must indicate a reasonable certainty as to your ability to obtain financing. Sometimes they may recommend a course of action for you to take, such as paying off certain bills or other financial obligations, or a savings plan that would ensure your ability to obtain financing to execute the purchase of your home.
If you do have credit problems: We may still be able to help. Depending on what your situation is, you may still be able to rent today and buy down the road. We have several different options that could help, but it depends on what financial resources you currently have available.
Rent credits are a portion of your monthly lease payment that are credited towards the purchase price or down payment when you execute the purchase of the home. These credits accrue monthly and are earned only when the purchase is made.
How The Deals Are Structured
You lease the property from the seller for a specific period of time, usually 1-2 years depending on your personal situation, and during that time you have the option to buy it at a price agreed upon by both parties when you first move in.
You also pay a "Option Consideration Fee" when you move into the home. This money will apply to the purchase price of the home and will reduce (or sometime eliminate) your down payment when you eventually take out a mortgage with a bank. The minimum "Option Consideration Fee" typically accepted is $3000 plus the first monthly lease payment. So if the monthly lease amount is $1,400 and the "Option Consideration Fee" is $3000, you will need $4,400 to close the deal and move into the house. Make sense?
Each property is completely different and has a different "Option Consideration Fee" amount. When you register online here just tell me how much you have for the "Option Consideration Fee" and I will try to only find homes that fit those specifications.
For example, if you have $5,000 for the "Option Consideration Fee, you will receive information on properties that fit this criteria, properties that you can obtain for a $5,000 "Option Consideration Fee" or less. I encourage you to be realistic about what you can afford, so your payments don't stress you out. I sell homes in all price ranges depending on the amount you have available for your "Option Consideration Fee".
It is my goal to see you eventually qualify for a mortgage and refinance the house, pay the seller your agreed upon sales price and put you on the deed. Remember, you do NOT have to qualify for a mortgage right now. This is the greatest appeal of a rent to own program. It allows you time to establish your payments, repair and rebuild your credit, all while locking in the purchase price preventing inflation.
You can stop wasting money each month on rent. You will be able to own your own home and enjoy the tax benefits, equity buildup, and appreciation that only comes from being a homeowner. And best of all you can do all of this on the timetable you need and for a great deal less money up front than conventional lending requirements.
I work with several very good, reputable, and understanding mortgage brokers who are willing to talk to you and assist you in obtaining financing. Now, don't misunderstand, I don't expect you to be able to qualify for a mortgage right now. I understand that people experience difficult times and situations, which may be why you have found me in the first place. However, I also believe that everyone should have the right to home ownership and the many benefits and advantages that accompany it.
What I want to do is find out how soon you will be able to qualify. For some people, it may only be a few months while for others it may be 1 or 2 years. It doesn't matter to me how long it takes , but I don't want to put you into a program that doesn't give you enough time to get on track financially so you can get a loan when the time for that finally comes.
The mortgage brokers I work with are excited about doing your pre-qualification for a mortgage because they know that they have a good chance of getting your business down the road when you are finally ready to obtain financing. They are NOT going to be judgmental or condescending to you like so many other mortgage brokers or bankers, just because they can't do a loan for you right now. Like me, they have an understanding of your situation and are working towards long term benefits.
NOTE... This is for maybe 10% of you out there. Sometimes we discover that you qualify for a home loan right now. You may have thought that you had bad credit, but it turns out after we look at your credit report that the bad things on your credit that you thought were so bad, didn't matter as much as you had originally thought.
If this happens, it's great because now your options open up. You can buy virtually any home on the market that is within your price range. I can offer you assistance with that too! But remember, that's only going to be for about 10% of you who are reading this page.