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Rent with an option to purchase can be a great way to purchase a home. Some sellers will give credit for a portion of the rent, to cover the downpayment when its time to purchase the home. The FHA rent credit sounds good, but it is one of the hardest credits to use. I've had several loans that had to be restrucured because they were not able to meet the requirements.
One of the most important things to know is when FHA uses the term "RENT CREDIT", they are refering to the "the amount of rental payment that exceeds the Appraiser's estimate of fair market rent".
This means a Single Family Comparable Rent Schedule will be ordered along with the appraisal to confirm the amount the renter has paid is above the market rent reported for that area.
ASK the UNDERWRITER TIP: During the application process, its important to ask renter (borrower/purchaser) if they are paying above market rent. The amount of rent credit will be calculated using that amount. They will not be able to use the rent credit if they are paying market rent.
***Look out for our bite-size training Webinars and our upcoming FHA & USDA webinars.***
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D. Bass
Underwriter/Training and Development Coach
www.asktheunderwriter.net
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