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How does a "lease-to-own" option work? Are these still an option? And does the amount that I pay really go towards ownership?

by justin88266 from Santee, California. Feb 23rd 2016 Reply


Justin Murray (JustinMurray)
#103 ranked lender in Illinois - 172 contributions

It depends on the specific lease to own option you are considering. You will need to look at the terms as they are all prepared differently depending on the source/lender.

Feb 23rd 2016
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William J Acres (William_Acres)
#2 ranked lender in Arizona - 7,788 contributions

Buyer beware.. A lease to own is nothing more than a lease..If you purchase a home and you finance it with a mortgage, and you are late on the mortgage payment, there is a procedure that must be adhered to which gives you ample time to bring the loan current. if you don't and the lender forecloses, then it will be months and months before you actually lose your home. but with a lease option, If you skip a payment, you can be evicted, usually within 30 days, and any funds that you paid to have the option to purchase is now gone.. you lose it all. There is actually an investment strategy that says you advertise "lease to own, no credit, bad credit ok".. you pay the seller $5000-$10,000 or more.. and they hope and pray you are late on the payment.. once you are, they file to evict you keep your money.. If you think about it.. when the market is really hot, like it is right now, why would a seller offer financing when they can sell the home on the open market and sell it really quick.. the answer is simple.. there must some benefit to them to sell the home this way.. and it usually has to do with them making more money.. Understand that there are no conforming guidelines on "lease to own"... anyone who offers this can make up their own rules.. so when you ask how much goes towards the sale price, the answer is what ever is in your contract.. But as a 28 year real estate investor, my advise is to stay away from these types of deals.. you will get burned. I'm a Broker here in Scottsdale AZ and I only lend in Arizona. If you or someone you know is looking for financing options, feel free to contact me or pass along my information. William J. Acres, Lender411's number ONE lender in Arizona. 480-287-5714 WilliamAcres.com NMLS# 226347

Feb 23rd 2016
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Larry Gray (lgray_312_247)
#5 ranked lender in California - 1,127 contributions

There are certainly different terms depending on the lease to own that is offered, and as William Acres clearly explains, caution is important. The idea is generally toget credit towards a down payment primarily so as to be in a position to purchase without having to come up with a down payment in many cases. If the idea is you do not qualify yet for other reasons, but hope to by the time you might purchase the home, just know that it is possible you will lose the extra money you gave the landlord/company to cover eventual down payment if you do not qualify for a loan by that time. This is getting popular in a number of States as specific companies are providing this as a means to sell more houses. I certainly can see it as a good thing.However, where housing is particularly in demand in areas of California I do not see this really becoming common place. There are local and State programs to gain down payment assistance and even closing costs assistance if you qualify. We provide them for borrowers who are able to successfully compete for a home in "HIGH DEMAND" areas. Also, on your lease to own contract, be sure and note if you have to pay what the value is by the time you begin your loan process to own the home.

Feb 24th 2016
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Jesse Stroup (jessestroup)
#196 ranked lender in California - 589 contributions

You will need to find a home owner that is willing to offer a lease to own. I know many people do this and the deal is up to you and the seller.

Feb 26th 2016
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