Most certainly, the national real estate landscape has quieted, with home prices and sales down over the past year. Even with the reduced mortgage rates, many people will find it difficult to secure a home loan.
Consumers who are locked out of the housing market can still get in with a little creativity on their parts. By leasing a home with an option to purchase the property within a specified period of time, home ownership could be within reach.
A lease option is a terrific way for people to get into the home they want right now and live in it as a tenant. Then, at some point within the option period, usually one to three years, renters can “opt” to purchase the home for a predetermined price.
What you should know about a lease option:
- Lease options are typically for a one to three year period. If you want the home during that time, you can opt to buy it or walk away and allow the landlord to sell it to someone else.
- You’ll be expected to pay an option deposit which will be applied to your purchase. In addition, you may be charged an amount over and above your monthly rent money which coupled with the deposit be applied to your home’s purchase.
- If you decide that you don’t like the home, you can walk away from it without obligation to purchase it. Depending on the terms of the agreement, you may or may not get the deposit and extra monthly payment monies back.
- A lease option allows you to accumulate money which will act as the down payment for your home. Many consumers find that coming up with thousands of dollars for a down payment is impossible. The accrued funds will act as your down payment.
Of course, you must have good credit in order to qualify for a mortgage once you exercise your lease option. Make sure that your credit reports are clean and your credit score is good enough to qualify for a loan. See a mortgage professional to get pre-qualified for a loan before exercising your option.
A lease option serves as a method of forced savings of sorts, money you’ll come up with on a monthly basis which will be added to your down payment. Not every seller will agree to this option, but in a slow market presenting a lease option could be one way that a seller gets out from underneath his property, but one to three years later.
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