Many people wish to buy a home, but some do not have the down payment needed or are unable to secure a mortgage. A lease with purchase option provides these buyers with time to work on credit issues and save money for a down payment. Renters can do this while living in the house they potentially want to buy. The rules of leasing to own properties govern both the owner and the renter. Read on to learn about the financial information, obligations, pricing, and risks of entering a lease with purchase option agreement.
Financial Information Associated With Lease With Purchase Option
Entering a lease with purchase option agreement means agreeing to pay an up-front option fee just for the privilege of renting to buy. The option fee in a lease with purchase option agreement is usually 1 to 3 percent of the home’s purchase price. The fee serves as an incentive for the seller to reject other buyers and forgo the sale until the lease is completed.
Monthly rent in a lease with purchase option agreement consists of two parts. The first part of the payment goes to the owner as rent. The second part of the payment goes to an escrow account to later be used as a down payment when it comes time to make the purchase.
Obligations That Come With A Lease With Purchase Option Agreement
The property owner must stick with the purchase price agreed upon at the beginning of the lease with purchase option contract. If the price of home skyrockets during the contract period, the buyer will get a great deal. The owner is obligated to sell the home to the renter and cannot accept other offers from potential buyers unless the lessee backs out.
If the renter backs out of the purchase, the owner can keep a predetermined sum as a penalty for breaking the agreement. This penalty is usually no more than 5 percent of the purchase price, but may vary.
Fair Pricing In A Lease With Purchase Option Agreement
Banks have rules when it comes to lease with purchase option transactions. The rate you pay every month has to be in line with what other renters are paying for properties that are similar in the same area. If your monthly rate is much lower, the lender may not give you a loan. A low monthly rate may not be enough evidence of your ability to pay a mortgage.
Important Information About Alternative Lease Options
Lease with purchase option owners are not actually buying their home until the lease agreement has ended. However, renters may still be liable for debts attached to the house. If the homeowner owes more money on the home than what it is worth, the buyer may not have an option to purchase at the stated price. The seller has to follow rules within contacts with existing creditors before they can honor their lease with purchase option agreement with a tenant. Renters also need to be aware of which party is liable for maintenance and repairs before signing their lease with purchase option contract.
Least To Own With Purchase Option Homes In Amarillo Texas
IPS Amarillo’s lease with purchase option is perfect for people that don’t want to lose all their investments to rent, yet are not quite ready to commit to a mortgage. If you choose to pay the option fee, it will reduce your monthly payment. If you don’t want to pay the option fee, you will get a monthly credit towards your home purchase. Learn more about our Lease Options today!
We have many Available Properties in Amarillo and the surrounding area. For more information about the homes we offer, give us a call at (806) 220-6816 or Contact Us via email. You can also visit us in person at 5809 S. Western St. #260 in Amarillo.