We are going to be leasing a house for the next year. We found a nice house that we think would be great for us. The owner has mentioned that we could do a lease w/ an option to buy. It sounds attractive, but is there anything that I should be cautious of as a buyer?
It doesn’t seem like it commits me to anything and she said she would take a portion of the rent paid and apply it to a down payment if we choose to buy. She isn’t going to charge me more to do this, so would it be wise for me to do?
Also, what is typical of the amount paid that would be applied to rent?
I’m leaning toward doing it, but if anyone w/ more experience can help me I would appreciate it. Thanks
It’s a great opportunity to become a homeowner even if you have low or no credit. If this interests you, then treat the house as if you own it. Be sure that you have anywehre from 1-3 years to choose the option to buy the property.
While you are leasing the property – you get to see how the house "works". Does the house need any work? You’ll see the gas and electric and perhaps water bill. Can you afford it?
(Mortgage – Taxes – Gas/Electric – Water – Minor Repairs – etc)
Will the owner finance the mortgage. If so, at what interest rate? If the house needs minor improvements and you agree to take care of it – will the owner take this off the final asking price.
Depending on the house – location – condition of house and your personal goals/needs this can be a GREAT opportunity to become a homeowner.
Take the time to build your credit during this time. You may also qualify for a bank loan at a lower rate. Are you a veteran? There are home loans for veterans too.
Sample the house as a renter. See if you like the house and neighborhood. Hopefully the house is in a decent area or up and coming. If so, go for it!
A lease is your rental contract. When it is a lease with a option to buy it can be two ways. It can be a lease for 2-3 years where anytime in those 2-3 three years you can buy the home at the priced agreed upon before the contract. Some landlords will give incentives and have part of each months rent credit towards the sale of the house.But if you choose not to buy you can just stay as a regular renter.
other times you have to buy the home before the lease is up or when it is up. Those are the two differences.
That’s exactly all it is – she gives you a credit toward a downpayment based on part of your rent. How much will go toward rent and how much toward a downpayment will be spelled out in the contract you sign. I would think she would hold out at least enough to cover her mortgage and other minor expenses and then maybe apply all of the rest as a downpayment.
This is actually not a bad deal. It gives you a way to essentially build up a savings that you can use as a downpayment (although she probably won’t pay interest on it) and lets you decide whether you like the area and/or if there are any problems with the house.
You are not committed to actually purchase the place, but if you don’t, you will not get a refund of what she has been holding as a downpayment. So, just consider 100% of it rent, and then if you decide to buy, a surprise savings for a downpayment.
Don’t do it , its Stupid,
If you know you like this house and are already familiar with the area, and neighbor hood then FINE it might be worth it to you
But the way i look at it, why not just rent and pay the lowest rent possible, and then save your money your self.
then when you are ready to buy a home, go to lending tree.com
get preapproved for a loan, and find a great house in the area you really like, and use the money for the house then..
Meg
home owner
This is a good way to get into a house, plus it allows you to try it out before you buy it, making sure everything is in good working order. The amount going toward down payment is totally negotiable between you and the owner. There is no standard amount. You are not locked into buying it. If at the end of your lease you decide you do not want to buy you can just walk away (without the money that was put aside for a down payment).
Good Luck.
shop hard.
the usual lease w/ option deal is higher than simply paying rent. the ‘buy’ price is also usually higher than the market thinks reasonable. [Are prices in this area falling already? or likely to fall because of the coming mortgage debacle? So is she trying to get you to go for a deal at yesterday’s price when the value in 6 months will be 20% LESS??]
lease w/ option appeals to people whose credit is poor and thus they can’t buy outright because they can’t get a mortgage at a reasonable interest rate.
RE sharks sell these deals to folk who are going to ‘fix’ their credit. Most of them never do and so the shark wins.
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That does not mean that you haven’t found the private seller who is the exception to the ‘usual’ practices. If she’s owned the house for a number of years, maybe you have.
Use care here, use care.