I have done a lease option but never a lease option assignment and am confused on a few things. Not interested in sandwich leases at all. I find a seller and then do the lease option but do I dictate the terms or does the seller? In a regular lease option I put the option money toward the down payment and xx amount of dollars each month credit toward the down payment. If I am assigning the lease option to a TB where does their option money go if not toward the down payment? Does the seller say how much of the monthly payment goes toward the down payment? I hope this is clear what I am trying to ask? Thanks for any help on this.
I like to set the numbers and then present them to the owner based on information they provided me, such as list price, payoff, payments etc.
The owners are coming to me (or you) for your expertise in the LO field, so they are relying on you to tell them how it’s structured, including the financial end of it.
Every now and then you’ll have one that wants to make some tweaks, which is fine as long as they work for everyone.
You and the seller AGREE on terms…no one dictates to anyone. As long as the price & terms are sellable in your opinion and you see how you’ll make money just go with what you and the seller agree upon.
Option money goes toward the purchase price. You could have it go toward their down payment but the buyer will have to write a check directly to the seller, not to you or your entity. Then you have to depend on the seller to pass your money on to you (good luck with that). In other words, do yourself a favor and let it apply to the purchase price. If applicable, raise the sales price accordingly so that the seller will get their agreed-upon net at closing.
I have the TB make the cashiers check to my LLC, and at finance it will apply towards the 3.5% down, or 5% for conventional, BUT part of the key is having a mortgage person that has not had a frontal lobotomy to work with you. Per RESPA, I can’t make my TB’s use my mtg person, but every time they say, “Oh, my brother in law is going to get us the loan…” the BIL ends up calling me 10 months later, “Hey, this is so and so, I’m the BIL of so and so…I’m working with them on this loan and I was just wondering…uh…what’s a lease option?” Now I have to explain how to package it up for the underwriter…
Interesting…how are they able to get that through mortgage underwriting? Never seen a purchase where the down payment wasn’t at some point & time paid to the actual seller. I must meet your mtg person…lol
In most cases they accept the option to purchase agreement and assignment, and the TB or my company has a copy of the cashiers check, but some lenders require a sales contract, in which case it’s drafted and reflects the option consideration as paid and is noted as earnest money on the contract. I’ve been with my mtg person for about 6 years, so this is almost what she specializes in. She can do conventioal up in the NE, but I don’t think her bank does FHA up in the NE.
So it’s a lender that doesn’t have seasoning requirements…AND you have a loan officer who actually took the time to understand what we do…man you’re lucky…LOL!
Is her broker licensed in the states of MD, VA, & city of DC? :crossfingers
Only for conventional, not FHA unfortunately.
She can only do FHA in about 5 or 6 states with her bank.
course…she didn’t find out till AFTER she had switched from another lender a couple years ago…
She actually set up the credit improvement program that our TB’s go thru. It works great having the left hand talk to the righthand.