Lease Options - Q & A
Q: What exactly is a lease option?
A: A lease option is when a renter signs a lease with the option of purchasing the property for a specific price within the alloted time frame. A small portion of the rent is applied to future down payments in most lease-option situations.
For buyers who do not have enough funds for a down payment and closing costs, lease options are the most popular.
Q: What are the benefits of lease options? And how do they work?
A: When it comes to lease-option agreements, if the option is exercised, a small portion of the rent on the property in question is applied toward the purchase. This is known as rent credit. Rent credit is accepted by institutional lenders as part of the down payment only if the rental payments exceed the market rent. A copy of the valid-lease purchase agreement must be attached to the loan application, if one is in effect.
In a slow market, lease options give sellers several advantages. One of these advantages is a monthly rent which is higher than the market rent and the top-market value for the property. In addition, The renter is more than likely going to treat the property as if he/she was the owner.
