For many a beautiful family, a large yard in a good neighborhood and home ownership are still part of the American Dream. It’s time for this to stop being a dream and become reality. With lending institutions tightening their lending requirements it all but seems impossible for the dream of many to become reality. But there are choices, options and other avenues for a person to pursue. That option being Lease Optioning a home.
What is Lease Option? A lease option provides a way for many people to become home owners in today’s market. A lease option allows a person to obtain their piece of the American Dream without having to qualify for traditional lending up front.
Here’s how it works. You find a real estate investor with a home to sell that fits your needs and criteria. Once you have viewed the property and agreed to terms on the home you would then pay an option fee. This option fee is paid because you are asking the seller to take his/her home off the market to sell so that you may lease the property until you can get enough money for a down payment or work out whatever credit issues you may have prior to purchasing. Your lease term is agreed upon by you and the seller. The other terms should be established at this time such as monthly lease payments, purchase price, extensions, penalties and any other issues you or the seller may have.
There are some Pros and Cons to purchasing a home on lease option terms, let’s review them. Pros:
1. You can enjoy the pride of home ownership right away
2. You lock in your purchase price today even if the home is worth more when your lease term is up and you must purchase.
3. You gain property appreciation which equals equity
4. It’s easier than dealing with banks
5. If you have credit issues that prevent you from getting traditional financing this gives you time to work out those issues (a good seller should be able to assist in this area)
6. Your option fee and any rent credit can go towards your down payment reducing the out of pocket expenses you will have when getting traditional financing
1. If for any reason you decide not to or you can’t purchase the home when the lease term is up then you would forfeit your option fee payment.
2. You discover that the property has major defects that were hidden
When looking to purchase a home in this manner we suggest knowing who you are doing business with, getting a home inspection, and understanding all the terms of the transaction.