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by Stormy on May 13th, 2004

Stormy

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What percentage of your rent would apply toward a down payment on a house advertised as "rent with first option to buy"?

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Answers. 3 helpful answers below.

  • by anguilla on May 18th, 2004

    anguilla

    Zero. There's no connection between the rent and the possible future down payment.

    When you rent, you are paying for the use of the space month by month. Everything changes when you purchase. Just because you decide to buy, it doesn't mean that the landlord should have to forfeit any of the rent money you gave him/her over the years. Renting is one kind of business deal; buying is another.

    I was in a situation like that. I had been a renter of the same house for 13 years, and the landlord said the house was going to be sold and did I want to buy it.

    Since I had lived there so long, I knew everything good and bad about the place and was able to judge that it was a good property to buy.

    All the landlord is saying is that if you like the place and he/she decides to sell it, both of you could benefit from just striking a deal, rather than going through a house search or advertising or whatever other hassles are involved in buying/selling a house.

    "Rent with first option to buy" is just a nice thing to have. You're guaranteed you're not going to wake up one morning and be told "the house is sold, you have to move." You have some control over the situation.

    Of course, if you don't want the house or can't afford it, then you WILL have to move. But having first option to buy is a luxury most renters don't get offered.

    Good luck!

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  • by Sparrow243 on June 6th, 2004

    Sparrow243

    The advertisement "Rent with first option to buy," gives you the first right of refusal in the event the owner decides to sell the property during the rental/lease term.

    However, if you confident that you would be interested in purchasing the home in the future, you could ask the owner to to agree to a "Lease Option," for a specific amount of time, at a specific price and term; with a certain amount to be credited you you toward your down payment and or closing costs when you exercise the option. The ultimate purchase price can be based on present or future value. In addition, you must have a formal agreement to obtain traditional mortgage loan financing.

    For example. Lets say that the current market rent is $900.00 per month. The owner could agree to lease the home to you for let say $1200 per month. Based on this scenario, $300.00 per month would be credited to you toward the purchase of the home at the time you exercise the option. If you leased the property 36 months, your credit would be $10,800. It's important to remember that most lenders will want to verify the market rents in your area before they approve the owners (sellers) credit to ensure that the credit is above market rent and to ensure that the seller has not subsidized the lease payment. The lender may also require cancelled checks and or bank statements to verify that the lease payments have been made on time.

    Should you decide to enter into a Lease Option Agreement, I would recommend that you contact your bank or mortgage lender to inquire about their lending guidelines as it pertains to Lease Options.

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  • by NielsenData on July 3rd, 2010

    NielsenData

    I would make sure that you get this "option" in writing. Many mortgage lenders will help you with forms and paperwork / contracts if you commit to getting the mortgage from them once you exercise your option to buy.

    In the current market, renting may make sense, but I would try some of the more aggressive mortgage firms that have investors as well as brokers (so they have access to direct funding sources). I think what you're finding is while the larger banks are going to drag their feet on funding a mortgage, many of the more independent lenders will work with you so you don't have to rent at all.

    Food for thought.

    I know Everhome.com is a good source for mortgages and First Option Mortgage has its own lenders and investors (they are claiming 8 day closings... so there must be something there - http://www.FirstOptionOnline.com).

    Your mileage may vary.

    Thanks

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