We Sell Homes
Lease Purchase Program
(also called "RENT TO OWN" or "LEASE OPTION")
For list of Available Homes click here
LEASE PURCHASE is a financial arrangement that combines Residential Lease with a Purchase Agreement.
You're leasing a house with an option to buy it at any time during the lease term for the price set upfront.
Each month part of your rent goes towards the purchase - RENT CREDIT
(You're not throwing your hard earned money away anymore, you're building equity!).
The required down payment generely is 5%. It is called Option Consideration.
Both the RENT CREDIT and the DOWN PAYMENT go towards the purchase price and secures your exclusive right to purchase the property from us during the period of your lease.
LEASE PURCHASE Advantages
Lease Purchase offers you 3 important benefits
1. Small Amount of Up-Front Cash Required.
The amount of Option Consideration (down payment) is around 5% vs. 10-30% down payment required in conventional purchase. There is no closing costs, which would normally run you around $2K to $4K. Instead, you can have that money working for you.
2. Profit From Appreciation&Equity Buildup
(see * below)
By doing Lease Purchase you lock up the price of a home up front. During the term of the agreement the price of the home will not change, even if home values in the area increase.
If you just continue leasing where you are right now, you will likely discover that a year or two from today you will have to pay 10%-15% higher price for the same house you wanted to buy now. Why do that, when you have Lease Purchase alternative?
And not only do you profit from appreciation, you build equity through the rent credits that are given to you each and every month.
3. Time To Obtain the Best Financing
You buy yourself some time allowing you to work on whatever is stopping you from getting a loan today, your weak link. You must correct your credit, build up the down payment, or work up a consistent income from self-employment.
There is no pressure, no rush and you can search for the best financing available.
Most lenders will consider Lease Purchase as a partial ownership allowing you to "refinance" instead of treating it as a "new purchase" loan. That will save you some fees.
Control the home of your Dreams today which you can Buy Tomorrow!
Let's look at a typical example of acquiring a home using the Lease Purchase concept:
Sales Price: $ 100,000
Option Consideration: $5,000 (down payment)
Monthly Rent Payment: $1,000
Monthly Rent Credit: $250
(in this example 25% of your rent is credited)
After 12 months you will accumulate $3,000 (12 x 250) in rent credits.
So your EQUITY will be $8,000 (rent credits + down payment) after only 12 months.
You will only need to get a loan for $ 92,000 (sales price - equity), which wouldn't be a problem assuming you have paid the rent payments on time and other obligations were paid in timely fashion.
Let's compare this to a house that you buy through a bank.
Let's for a moment assume that you have A++ credit and that a bank is willing to give you a loan with only 5% down.
So to get in a house like the one in our example above, you would need $5,000 (5%) for a down payment, and you would need $2,500 (2.5%) for closing costs.
With a loan at 7%, only about $58 would go towards principal, the rest would be interest, taxes and insurance.
So in one year you would have 12 x $58 = $700 towards principal, and your equity would be $5,700 (5,000 + 700).
So as you can see you can build more equity with Lease Purchase plan ($8,000 vs. 5,700) during the first year and you don't need to spend money on closing costs.
Got less than 5% Cash Down Payment?
If you have a high income you can take advantage of our Down Payment Installment Plan.
On this Plan you would be making larger monthly payments so that you can build your down payment over the term of the Lease.
These will be separate monthly payments in addition to the base rental payments. The goal is to build 5.5%-6% of your purchase price while you are on the plan.
You will have to show an adequate income that will allow you to comfortably make combined monthly payments according to the terms of this program.
Example: let's say that in the above example, instead of 5% ($5,000) you had only 3% down, which would be $3,000.
The required down payment is $5,000 (5%), so the difference of $2,000 would be divided by 12 months, giving the extra payment of $166/mo.
So your total monthly payment would be $1,000 (rent) + $166 (down payment installment) = $1,166.00
Please, keep in mind that you can not use the Down Payment Installment plan to get in a house with $0 down.
The plan works only if you have 3% down payment, and if you can show high income to support it.
Got 5% down and can also afford to make a larger monthly payment?
Take advantage of our Equity Accelerator Plan.
If you can afford an extra $100 per month, we will do a 50% match in rent credit. That means if you pay additional $100 per month you would be earning $150 in additional rent credits. Or if you can pay $200 extra, you would be getting $300 in extra credits every month. So you can see that for every $100 you put we gave you $50 as a gift, isn't that a great deal? That would help you build a lot of equity in a short time.
Another way is to look at it as a forced saving plan where you get 50% interest on your money. That is a great return!
We highly recommend you to do this (if you are able) and here is why… When you go for a bank loan the lender will want to see a history of timely payments and the dollar amount you've been paying. They want to see you are capable of making large payments.
So the higher payment shows more strength and gives you a better chance for a better loan.
CONCLUSION:
The Equity Accelerator Plan helps you build more equity and a stronger history of payments.
Can You Convert Me From Lease Purchase To Your Owner Financing plan?
Possibly, if you can raise more cash for down payment during the term of your lease. We do it on a case by case basis, depending on your Lease payments record.
How Quickly Can I Get Approved For And Move Into The House?
Typically within 1-2 business days.
Do You Do A Credit Check And What Happens If I Have A Bankruptcy Or Credit Problems?
Yes, credit check is done in most cases. But things like bankruptcies, collections, being turned down for a bank loan or other credit problems are no concern to us in regard to getting you in one of our homes. We want to be familiar with your credit issues so we can better guide you to repairing your credit.
If the credit is extremely bad, you can still get approved but we won’t be able to be flexible on your down payment, or in some cases we may require you to pay a slightly larger down payment.
What Closing Costs, Fees and Points Shall I Expect To Pay?
Your share of closing costs is $150 for Lease Purchase, and $250 for Owner Financing program. You would pay them directly to the closing attorney. As you can see your total closing costs are only a few hundred dollars, so you're not wasting thousands of dollars like in a traditional purchase.
Also, you will need to bring to closing a cashier's check for the down payment, the 1st month lease payment, and the $100 security deposit. The $1,000 earnest deposit that you already had deposited would apply towards your down payment (that would be explained to you on your Earnest Deposit Receipt at the time you “tie up” the home).
What Happens If I Don't Qualify For A Bank Loan At The End Of The Term?
If, during the term of your lease, you were late on your payments, or other credit accounts, if you incurred additional debt, or jeopardized your loan in some other way, obviously, you were not making a serious effort to get ready for the purchase. Therefore, we won't give you a second chance.
If, however, you were on time and did everything you could, but still could not get financing, we will give you another opportunity. The price and terms may change, though, but we won't ask you to move.
Got more than 10% Cash Down Payment?
With a large down payment we can approve you for our Non-Qualifying Owner Financing program, which allows you to take full advantage of homeownership benefits, such as mortgage interest and property tax deductions (on your tax returns), and monthly mortgage loan balance paydown.
You can read more about it in the Owner Financing section.
Conclusion:
3 important Lease Purchase benefits:
1. Small Amount of Up-Front Cash Required
2. Profit From Appreciation & Equity Build Up
3. Time To Obtain the Best Financing
Additional benefits:
1. Down Payment Assistance available
2. Equity Accelerator Plan
* on some properties the Purchase Price is set to the future Fair Market Value, determined at the time of obtaining the purchase loan (at the time of exercising your option)
