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How exactly does lease option to buy work?
I have around a 640 credit score. I still have a couple things to fix on my credit. I need to to a place by the end of the year. I will not have enough for a big down payment to buy. Is Lease option to buy the right way to go for my situation?
Public Comments
- The advantage of the lease option is to fix the price today for a closing in a year or two. If prices go up, its money in the bank. If prices go down, then you walk, leaving your option money behind, but not having purchased a house that went down in price. The trick is to keep the option payment as low as possible. Try to get it as a credit toward the purchase price. Also be very careful to not violate the terms of your lease, as options are often contingent on being a tenant in good standing. You also have to follow the option exercise procedure exactly as it is spelled out or you may forfeit your option. It is worth hiring a lawyer to go through it with you before you sign anything.
- If you only have a few things to fix on your credit and it can be done in 6 months or less, you may want to wait on the lease purchase. Here's how it SHOULD work: - You located a home with the seller willing to lease purchase the property and sign a LEASE agreement with a payment of $X per month. - You sign a PURCHASE & SALES agreement for a puchase price of $Y by a specified date. - You sign a OPTION agreement that holds the home for a period of time in which the seller can not sell* the property to anyone other than you. You pay CONSIDERATION in the amount of $Z that will hold the property for you. The consideration is non-refundable. If you decide to purchase the home the consideration will be credited to you at closing. If you decide not to purchase the home the seller keeps the consideration. * The seller can sell you OPTION to another individual during that time period but it does not make your contract void. You can also negotiate to have a portion of your rental payments credited to you at closing (i.e.: Rental: $1,100 with a $100 credit each month for on-time payment). Good Luck! ______________________________ CAROLINE SIMMONS REALTOR® & Affordable Housing Specialist O. 866.894.3601 ~ C. 404.787.8685 ~ F. 404.745.8019 E. caroline@premyiergroup.com W. http://www.premyiergroup.com
