Leasing To Own

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!

 

 

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