Rent to own
I often receive calls from people looking for rent to own properties. If you are looking to move into a rent to own house please read this post. Make sure you have an attorney look at the lease before signing if you are dealing directly with the landlord.
So I run into this a lot when I deal with rent-to-owns and the renter wishes to purchase the home which they have been living in.
Let's just say the renter is paying $1,300 per month for rent. The appraiser has to add a "Comparable Market Rent Schedule" into the appraisal for the transaction. This form lists how much similar properties rent for in the area.
Let's just say that the comparable market rent schedule shows that properties rent for $1,200 per month. In this case, $100 per month would be credited back to the buyer and could go towards the buyer's down payment. So if the buyer has lived in the property for 36 months, we would credit the buyer with $3,600 which could go towards the down payment or closing cost on the purchase.
Many times, the problem which I run into is that the rent-to-own contract says that $500 per month is to go towards the purchase of the property. The borrower is only allowed to receive back that amount as a credit towards the down payment or closing cost ABOVE market rent on the Comparable Market Rent Schedule which can be verified as paid.
In these cases, we will reduce the purchase price to give the borrower the full credit and only credit the amount above the market rent towards the down payment. It is just a matter of working the numbers.
As always, if you have any questions on this scenario or similar scenarios, reach out to me at 1-216-780-1103 or shoot me a text. I specialize in difficult transactions (people with little money to work with, prior bankruptcy / foreclosure, collections, recent job changes, self-employed borrowers who show little income on their tax returns and manufactured home loans to name a few). I absolutely love getting called on transactions which are declined by other lenders at the last minute. I am licensed in 14 states and besides being a loan officer, I am also an underwriter and the owner of the company (which happens to be a direct lender -- so the buck starts and stops with me, we do not send the loan out and shop it around, the decision is made in my office). Reach out if you have questions, scenarios or buyers who need a pre-approval or deals going down in flames which have to be saved.
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