Examining the Lease to Buy Option
Having a bad credit can affect your chances of getting a mortgage. It means that it would be very difficult for you to buy a home. Fortunately, there is the lease to buy option which is ideal for people with bad credit.
Lease to buy option is a growing trend nowadays. It involves the combination of a rental lease with an option to buy the house. Typically, you will be given an option to buy the property within 1 to 3 years at a specified price.
With lease to buy option, you are required to pay an option fee of one to five percent upfront. This option fee will be credited to the purchase of the home.
As a buyer, you can live in the house and pay rent during the specified period of the option. Usually, a rent premium is added on top of the monthly payment and this will be credited also toward the purchase price. Because of this system, a lease to own option involves more expensive monthly payments. But if you can not get a conventional mortgage and you have a large income, then the lease to buy option is a good alternative for purchasing a home.
The Advantages of Lease to Buy Option
You can enjoy several advantages with a lease to buy option. First of all, you can lock-in the price of the home. This is beneficial if home prices are rising. It allows you to buy a home at a cheaper price.
This option will enable you to repair your credit while building equity to the home in preparation for conventional financing. Do take note that you are allowed to purchase the home even before the lease contract expires. Within the specified period in the contract, you will have exclusive right to buy the property. This means that the seller can not offer it to someone else as long as you hold the contact.
Another big advantage of this system is that a ready contact will be in place in case you decide to buy the property. Most important of all, the lease to own plan will enable you to live in the house before you can own it.
Some Disadvantages to Consider
Although lease to buy option generally benefits homebuyers, it has some disadvantages that you need to watch out for. One of the most important things that you need to do is to get the assistance of real estate professionals to draft the contract.
It is very common for some homebuyers to miss out some provisions in the lease contract which could diminish your chance to buy the home. If this happens, all your initial investments will be wasted.
This can also happen if you change your mind later and decided not to pursue the purchase. The money you invested in the options contract are non-refundable so they will be lost forever if you can not or unable to acquire the property.
Like other home buying options, lease to buy has benefits and downsides. But remember that this option is still your best alternative if you have bad credit. It allows you to rebuild your credit while preparing for home ownership.
Rob K. Blake, refinance expert and author, educates mortgage shoppers on finding local providers by state like Alabama Mortgage Brokers and Lenders and provides reviews of national companies like AmTrust Bank Mortgage.
Article Source: ArticlesBase.com
