What does a Lease Option entail?

For many, renting a home is a waste of money. So instead of waiting to qualify to buy, renters find themselves looking for lease options. While this option can be attractive to some, it can be very risky for others. Take for example a lease option that requires 5k down and the renter must buy the home within 2 years.

If that renter had a recent Bankrupty or foreclosure, they wouldn’t be able to buy for at least three years. Even worse, what if the renter put 5k down and paid an extra 200 per month? There are many lease options out there and some require as little as 2k to obtain the lease option.

Before getting yourself into any lease options to buy, it is imperative you speak with a mortgage loan officer. Have them run your credit report and find out just how long or what will be required to buy a home. Knowing this will save you from loosing any money put down for a specific option. You may even be able to buy in a short time than you thought.

Before you consider a lease option!

Before considering a lease option, a renter should try and buy a seller carryback. Seller carrybacks are offered as either an agreement for sale or a first deed of trust. A seller carryback will usually cost the same as a lease option but the benefits of having legal title far outweigh a lease with equitable title.

Lease Purchase Homes in AZ

The problem with most Lease Purchase agreements is how they are setup. Most contracts do not involve the owner setting up mortgage payments through a title company, so there is no way of monitoring the owner to confirm they are making the mortgage payments on time and have no risk of foreclosing. If the owner does foreclose then the lease purchase agreement becomes voidable. A standard lease purchase in AZ requires at least 5% down. This amount does not include the upfront deposits for the lease agreement. This amount can easily ad up to several thousand dollars depending on the lease payment. First months rent, security deposit and cleaning deposit fee’s is above the lease purchase down payment.

Rent To Own AZ

Most Rent to Own agreements are never recorded and very rarely require a huge amount down like a lease purchase. Most rent to own homes in AZ have incentives that count towards the purchase price if they tenant ever decides to purchase the home. The amount being contributed is hardly enough for it to be a real benefit for paying extra on the lease payments. A standard rent to own in Arizona may sound like this: If you pay $1500/ monthly, we’ll count $200.00 of your payments towards the purchase price of the home when you buy it. Now, let’s think about this. The landlord is asking for an extra $200.00 per month but hasn’t stated the purchase price. Even if he did state the purchase price, is it in writing?

Things to watch out for in a Rent to Own agreement

-Extra money being counted towards the purchase price, doesn’t help you..just ask for a lower rent payment.
-Get the purchase price in writing
-Have the information recorded with a title company
-Avoid lease agreements that stipulate a time you need to buy the home unless you know for sure your credit by that point is will allow for this.

Conclusion

The best type of lease option, lease purchase or rent to own in Arizona is a seller carryback. There are different types of seller carrybacks, so know the difference before getting locked into one. A seller carryback will give you instant ownership and allow you to refinance, sell, rent the home, take out a 2nd mortgage or anything having to do with the property, because in a seller carryback you really own the property.