Rent Or Lease With Option To Purchase .............. Lending Restrictions Introduction?

Mortgage and Lending with George Souto NMLS #65149 FHA, CHFA, VA Mortgages NMLS #65149

Lately I have been reading several blogs about Rent or Lease to Purchase.  In its simplest form this is an agreement between the Renter and Landlord, by which the Renter agrees to purchase a property at a later date, and in return the Landlord agrees to contribute money towards downpayment.  Most of the blogs that I have read leave the impression that this is a simple process, and an option that is beneficial to both parties.

What has surprised me with many of the blogs is how little understanding that most Realtors have of the financing restriction on this type of transaction.  As a result many Renters are surprised when it comes time to purchase that the money that they thought would be available towards their purchase is not.  Just because a Landlord agrees to contribute money received as part of the rental payment each month towards the downpayment, does not mean that they will be allowed to so.

The best way to explain this is by going right to the Fannie Mae and FHA guidelines on the amount of acceptable funds that can be contributed through a Rent or Lease to Purchase Agreement.  The guidelines for both Fannie Mae and FHA are similar but different, and Renters need to know of these guidelines before they enter into a Rent or Lease to Purchase Agreement, so that they do not find themselves in a very uncomfortable position latter on.  Once you have seen what the Fannie Mae and FHA guidelines are, you will understand the need to proceed cautiously, and might even change your mind as to how great of a deal this is to both parties involved.

I will present this as a series of blogs so as to not make any of them to long.  This blog will serve as the introduction to this topic, the next one I will address the Fannie Mae Guidelines, and the third blog will address the FHA Guidelines.  Hope this series serves as a guide to future discussions on this topic.



 Info about the author:

George Souto is a Loan Officer who can assist you with all your FHA, CHFA, and Conventional mortgage needs in Connecticut. George resides in Middlesex County which includes Middletown, Middlefield, Durham, Cromwell, Portland, Higganum, Haddam, East Haddam, Chester, Deep River, and Essex. George can be contacted at (860) 573-1308 or

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 Info about the author:

George Souto NMLS# 65149 is a Loan Originator who is licensed in #CT, #RI, #MA, #NH, & #FL and can assist you with all your #FHA, #Conventional, #VA, #USDA, and #State Bonded Progam #mortgage needs in #CT, #RI, #MA, #NH, & #FL. George resides in Middlesex County which includes #Middletown, #Old Saybrook, #Middlefield, #Durham, #Cromwell, #Portland, #Higganum, #Haddam, #East Haddam, #Moodus, #Chester, #Deep River, and #Essex. George can be contacted at (860) 573-1308 or


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Fred Griffin Tallahassee Real Estate
Fred Griffin Real Estate - Tallahassee, FL
Licensed Florida Real Estate Broker

   Excellent Blog, George.

    Many "Rent to Own" or "Lease with Option" Blogs fail to account for Lending Standards.   Landlord-contributed money is a Seller Contribution that must be approved by the Lender.

Apr 09, 2012 12:46 PM #1
Jeff Dowler, CRS
eXp Realty of California, Inc. - Carlsbad, CA
The Southern California Relocation Dude


Looking forward to learning more about this. I have never had a least with option deal materialize but a number of people have asked about them. It will be helpful to know more about the financing restrictions.


Apr 09, 2012 04:24 PM #2
Joe Petrowsky
Mortgage Consultant, Right Trac Financial Group, Inc. NMLS # 2709 - Manchester, CT
Your Mortgage Consultant for Life

In many situations a rent tot own, lease with option to buy, structured correctly work out well for both parties. The important thing, they need to be structured correctly, this is key. If not, they become a problem for the financing, as you know.

Thank you for sharing the post with all of us.

Apr 09, 2012 10:59 PM #3
Nick T Pappas
Assoc. Broker/Broker ABR, CRS, SFR, e-Pro, @Homes Realty Group, @HomesBirmingham & Providence Property Mgmnt, LLC Hun... - Huntsville, AL
Madison & Huntsville Alabama Real Estate Resource

George, a client of mine recently closed on a lease option...different from a lease purchase.  In this case it worked out well because the buyer knew he was going to buy the home and not lose substantial option money.  

Apr 12, 2012 12:40 PM #4
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George Souto

Your Connecticut Mortgage Expert
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