Will The Bank Recognize My Accumulated Rent Credit As The Down Payment When I Exercise My Option?
Come on guys I know someone knows the answer to this one!!!
Does it matter that I've been the tenant/buyer in the property for over a year?
I'm in the 18th month of a 24 month lease-option contract. I was counting on my rent credit to cover my down payment Now I'm hearing that banks might have a problem recognizing the rent I've already paid to the seller. Any suggestions out there?
What I know about this subject (from theory):
Everything have to be in your LEASE-OPTION CONTRACT:
1. Bank WILL NOT recognise your payments, like downpayment, this money only DECREASE PRICE of your property.
2. Not all money counted. Only the part that you OVERPAID every month compare to other rents in the area. If you paid regular rent, without overpayment, you did not pay anything like future buyer and nobody ( no banks, no seller) will recognize your payments.
But first read again your LEASE-OPTION CONTRACT.
it all depends on the origination and structure. this should have been explained in detail from the leasee. to answer your question yes, you COULD be able to apply a portion of or all of your acumulated credit as a down..but once again, this depends on what was agreed and structured to in writing and signed at the kitchen closing.. if you were "counting", on your rent credit going towards your down, then it sounds that you may have assumed that the credit was in fact going towards the down, which could be a problem.. i usually do not apply my monthly pack to a down or closing for my end buyers. however, i do include the up-front consideration funds as going towards the down or what ever they need it for , in the form of credit or actual cash.we use a LSC just for this purpose, which bares and discloses to the lender of choice the credit or even cash on behalf of the option buyer.. if aint in writing it aint worth fighting...i need a little more info on the structure to give a proper answer..
regards-pat
If you can prove your payments with cancelled checks, then you have enough seasoning to get an equity loan based on the houses current appraised value. Depending on your area, you might have enough appreciation where the LTV will cover the purchase.
just have the seller give you the money credited as part of the earnest money and you'll be fine.
the rent is not automaticly applied to your d/p it has to be implied in the l/o agreement. if it is not stated as such it is rent only....kenmax
if you are not sure consult an attny........kenmax
Check with a mortgage broker. CIT Group is a lender which will allow this.
It seems to me that the bank must go along with the terms of the lease option agreement. Keep in mind that a lease option is essentially two contracts-- a lease and and option. My preference is that they be separate documents as well. Usually there is a lease component and an option consideration. The lease component is just that and goes to the seller. The option consideration is what you are giving to the seller (optionor) for the right to purchase the property in the future (your option rights). This can be as creative as you and the seller wish. The consideration can be a lump sum paid all at once or a collection of monthly payments. If you and the seller agree, if you exercise your option, you can have all of the option consideration applied to the purchase price, or (if there is agreement) applied to the down payment. I don't see how the bank can go against the terms of the agreement. If the option consideration is to be applied to the down payment, the seller has already been paid this according to the terms of your agreement.
Make it easy on yourself; always state in your Contract that Option Consideration will convert into a down payment and that rental credit will go towards the purchase price of the house. This is what most lenders prefer. Try to deal exclusively with Lease Purchase Lenders who will treat it as a refinance, so bad credit won't be an issue (except to determine the interest rate). They will loan around 90 percent of the appraised value, so any down payment requirement is mostly a moot issue. Talk to local mortgage brokers to access these little-publicized sources.