Leasing-to-own
a home is a flexible approach to becoming a homeowner when a traditional
home purchase may not be feasible. A lease-to-own arrangement
can be a solution to typical obstacles in home buying. Even
if you are currently unable to purchase a home, or if you are still
a year or two away from buying a home, Lease-To-Own programs offer
the opportunity to lease your home now and build equity which is applied
toward your purchase in the future. You may have up to 3 years
to complete the purchase, yet there is never any obligation to buy
the home if you later decide not to.
Possible
benefits
Build ownership in a home while you rent/lease it.
Easy credit approval, even with previous financial difficulty or bankruptcy.
Home
ownership for self-employed individuals, despite business debt.
Live
in your new home even though your previous home is not yet sold
Flexible
Lease-To-Own terms from 12 months to 36 months.
Simplified
home mortgage financing at end of lease term.
Fixed
purchase price of the home at inception of lease.
Minimal
"purchase option fee" (down payment) compared to a traditional home
purchase, which could require 10%-20% or more of the purchase price
as a down payment.
No
obligation to purchase in the event your situation changes
How
it works
Upon
locating a home that meets your needs, you enter into a Lease-To-Own
arrangement, which comprises a Standard Lease Agreement and also an
Option To Purchase Agreement. The Standard Lease Agreement is
typical of any residential rental arrangement, however the Option
To Purchase Agreement secures you the right to purchase the home at
a future date and at a pre-determined price.
An
option fee, which is generally 3% of the home purchase price, is paid
to secure the Option To Purchase Agreement. 100% of the option
fee is applied toward the purchase price as a credit when you purchase
the home at the end of the lease term. In addition, any amounts
you elect to pay in excess of the base monthly lease/rent are also
applied 100% toward the purchase price. This enables you to
build equity ownership in your home.
At
the end of the defined lease term (12 to 36 months), you obtain
financing to purchase the home. Since your option fee and
any additional monthly amounts paid have built your equity in the
home during the lease term, and you have been living in the home for
the past year (or two years, etc.), and assuming your monthly lease
payment history is good, and your other credit obligations have been
corrected or maintained in good standing, the lender will be more
receptive to providing you a mortgage. Essentially, your credit
management and lease-to-own arrangement present you as a better credit
risk to lenders. In addition, no additional down payment may
be required when you purchase the home because of the equity you have
already established, compared to the value of the home.
The
Standard Lease Agreement and the Option To Purchase Agreement are
fulfilled and terminated when you purchase the home. You then
own the home!
