Thursday, February 09, 2006

Lease to Purchases / Rent to Own?

This was a creative solution to (supposedly) assist credit challenged people in obtaining homes because the home buyer could not obtain traditional financing. The programs do work, but check out the people with which you are entering the contract. There are several methods used. Be sure your contract is detailed and I personally advise you to allow a lawyer to read over the agreement prior to signing. Often there are little catch clauses in the contract, which can leave the "want to be" homeowner out a bunch of money and with no place to live. First on the lease to purchase contract... some call for you to pay a lease then buy at the end of the year. Typically, a down payment is collected and then you pay a monthly lease until the contract calls for you to obtain financing. Ideally, after 12 months of great pay history you should be able to obtain a purchase loan. In some cases you can obtain a refinance loan on the property even from a lease to purchase contract. The other method (which usually cost you more monthly) allows for a portion of your lease payment to be escrowed towards your purchase at the end of the Lease to Purchase contract term. This allows you to create a larger downpayment over time. Beware of the following differences in legal terms though. Lease/Purchase agreement and Lease to Purchase agreement... The first calls for two separate contracts, with the purchase not being legally tied to your lease. The second ties the two contracts into one contract which is typically better for the Home Buyer and not the Seller. (Ask a lawyer or leave a message for further details) If you want to buy a home there are some other alternatives available to you that allow you to get the tax credit that you do not get while leasing as well as a more binding contract to protect your interest more in depth. Check out http://www.ahouse4u.biz for more information on just one of the programs out in the new workld market place.

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