Rental credit in L/O deals

If a property is lease optioned is the rent credit and option fee considered a down payment or does it simply reduce to borrowed money in the eyes of the lender? I am wondering if a LO was used in a commericial property if the rent credits could be used to get me over the 20% DP requirements.

In a retail purchase you can use the rent credit as long as it is written into the L/O contract.

So if I had a say $500 a month credit for 12 months a lender would realistically consider that a $6k downpayment? I would definitely not consider doing it without having it in the contract, if there was a dispute and its not on paper I’d be SOL.

I think so long as you have the credit documented in your paperwork and you are paying a market rent or above for the property then the lender should accept the $ as downpayment. They might balk at a deal where your rent is below market or the credit is considered excessive.

Thanks for your help. Definitely wouldn’t be getting any crazy rent credit numbers, just 50% or so rent credit. When you say excessive credit are you talking about someone that may be lying about how much credit was received to fudge the numbers and get by fraudulently with no DP? That won’t be a problem, I’m not into the mortgage fraud thing. Everything will be laid out in the initial contracts as to how much rent credit will given for each payment and all payments would be well documented. Trying to think outside the box and use OPM to pay my down payment. :slight_smile:

Yes, that is what I was alluding to. Say a deal where you are receiving 75%+ credit toward downpayment. That just doesn’t make economic sense and a lender would likely question the numbers.