Hello To All
My question is
if I put in the lease option to buy contract that the full amount of rent is going towards the down payment of house,( rent 1,000-- credit a month also 1,000-- kinda like I am setting up a land contract but not) will lenders accept that as down payment and I wont have to come up with an additional down payment to the lenders?
Example
100,000 house — 10,000 rent credit paid toward down payment to seller
will lender just say ok we will just finance 90,000 cuz she has already put down a ten thousand down payment?
Also should I have seller give me receipts? Is that good enought to show proof of payment
This is a good question that comes up somewhat often and can be misunderstood. I am a mortgage banker of 15 years and I can tell you how Fannie, Freddie and FHA view this situation.
The lender will have the appraiser give a rental value, meaning what the rent comps. are on the property so they can determine the market rent on the subject property. They will do this when the appraiser also gives the home its sales value by way of all various comps.
Once the market rent has been determined they will then subtract that amount from the overall monthly amount that you are paying and anything over and above that amount counts towards the eventual down payment. As an example:
Your paying 1200.00 a month all of which goes to the full down payment credit.
The Market rent is 1000.00, so the lender willl only give you 200.00 per month as actual credit that they will show on the loan app. as down payment paid.
Now keep in mind any contract of this nature between you and the seller is still binding on the seller even if the lender see’s it differently as far as the financing. But you may be required to come up with more money down if you werent aware of this situation with the lenders guidelines.
Hopefully that answers your question.
Oh I forgot to tell you one other aspect of a lease option at least with Fannie and Freddie, I dont with FHA or VA, and I dont know if the guidelines have changed on this recently, it certainly would be good to check it out.
Last I knew if you held a lease option for a year or more and payed on time, and you will need to provide proof of those payments and receipts from the seller wont do it, you need proof you paid and the money cleared. But if you did this you then could treat the deal as a refi and if you were lucky enough in this environment for the value to have went up, or at least be at a max. 95% LTV then you could just do it as refi with no other cash out of your pocket.
Dont forget to calc your closing costs in there as well though.