People ask me all the time about creative financing options. While there is certainly lots of lending going on and plenty of available cash for qualified borrowers, the criteria that lenders are using to qualify a buyer have become much tighter & more restrictive. As a result, there’s a lot more that need a home right now but they can’t get traditional financing due to job loss/job decline OR just because the tighter lending restrictions make it difficult for them to qualify.
Quick note of caution:
PLEASE don’t assume that you can’t qualify until you ask a real pro!
I mentioned above that people ask me all the time about creative financing. Well, probably 40% of those people CAN get a traditional loan – they just thought that it was impossible “in today’s market”. It’s not impossible. Great financing is still out there, in fact the rates are AMAZING! (4.x % in many cases).
Sorry for the long set up to this post about lease purchase options, but I think it’s required reading.
I LOVE lease purchase (for buyer’s who don’t qualify today for traditional financing). Here’s why. With a lease purchase contract, you get to move into the house now and see how it works for your family. If everything works out great, then you have the right to purchase the home at a pre-determined price. Plus, it allows you more time to get your finances in order – usually 12 to 18 months.
And, it also works for the seller. Here’s how:
The seller also gets a great deal because he probably will command a bit higher price than on today’s open market AND he gets his rent paid for the duration starting this month (emphasis on THIS 
The seller also will retain a substantial deposit in most cases that is non-refundable. Perhaps the best part for the seller is that the buyer is way-more-likely to be deeply invested emotionally and otherwise in the property, so the chances are very good that the property will be well cared for and that a closing will ultimately take place in the end.
When we structure a lease purchase for a client, here’s some of the terms we typically develop:
- Initial deposit of 1% to 3% of the purchase price
- Rent amount consistent with the overall market
- Purchase contract price typically 3% over market
- 12 to 18 month lease term
Each of these terms has flexibility and requires some thought, based on the specific details of your situation. Feel free to comment below about your experiences with lease purchase or send me email to matt@diamonddwellings.com
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