How do lease options work and what are the benefits?
A lease option is an arrangement with you and a seller to exercise the option to buy a house after you have rented it for a specific period. A portion of your rent would applied toward the purchase if the option is exercised. This is referred to as rent credit, which most institutional lenders will accept as part of the down payment if rental payments exceed the market rent and if a valid lease-purchase agreement is in effect, a copy of which must be attached to the loan application. If you are a seller, lease options can give you several advantages, especially in a slow market. These include a monthly rent higher than market rent, top-market value for the property and tax-free use of the option consideration until the option expires or is exercised. Also, the renter is more likely to treat the property like an owner, tax-free use of option consideration until the option expires or is exercised.
” http://realestate.yahoo.com/re/selling/lease_options/how_do_lease_options_work_and_what_are_the_benefits_/ 3. Most homes are owner-occupied, and most owners are not interested in becoming landlords or need to free up their capital to purchase a new home; rental income is usually not accepted as part of a mortgage application. When the real estate market is lively, it is straightforward to sell a home and there is no need for the seller to look for a creative temporary-rental arrangement. As for professional landlords, most landlords are not interested in parting with their rental properties and ending their stream of rental income. And, of course, buying a home now is a more straightforward arrangement in which the seller does not have to wonder if the house will still be on their hands in two years and the buyer knows the price is fair in the current market.
Most lease-option agreements specify that a portion of the rent on the property in question is applied toward the purchase if the option is exercised. This is referred to as rent credit. Institutional lenders accept rent credits as part of the down payment if rental payments exceed the market rent and if a valid lease-purchase agreement is in effect, a copy of which must be attached to the loan application. For sellers, lease options give them several advantages, especially in a slow market. These include a monthly rent higher than market rent, top-market value for the property and tax-free use of the option consideration until the option expires or is exercised. Also, the renter is more likely to treat the property like an owner, tax-free use of option consideration until the option expires or is exercised. Lease-options should be read carefully for details on transferring the option and other important concerns.
A lease option is an arrangement with you and a seller to exercise the option to buy a house after you have rented it for a specific period. A portion of your rent would applied toward the purchase if the option is exercised. This is referred to as rent credit, which most institutional lenders will accept as part of the down payment if rental payments exceed the market rent and if a valid lease-purchase agreement is in effect, a copy of which must be attached to the loan application. If you are a seller, lease options can give you several advantages, especially in a slow market. These include a monthly rent higher than market rent, top-market value for the property and tax-free use of the option consideration until the option expires or is exercised. Also, the renter is more likely to treat the property like an owner, tax-free use of option consideration until the option expires or is exercised.
