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How do lease options work
and what are the benefits?
ANSWER:
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. Read any
lease-option arrangement carefully for details on
transferring the option and other important concerns.
What is a lease option?
ANSWER:
When a renter signs a lease with an option to purchase a
property for a specific price within a certain time
frame, that is called a lease option. In most
lease-option situations, a portion of the rent is
applied to a future down payment. Lease options are most
popular among buyers who don't have enough funds for a
down payment and closing costs
Where do I get information on lease options?
ANSWER:
Contact your real estate agent (some even specialize in
such transactions) or read up on lease options at the
public library. If you have a real estate attorney, ask
if he or she has any prepared information you can
review. Most bookstores have a fairly hefty real estate
book section these days. Many current real estate books
have at least a section on lease options. If you are
considering a lease option, be sure you do your homework
first. And have an attorney or financial advisor on hand
to review any paperwork before you sign
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