Lease Option Homes/Seller Financing

Lease Options and Rent to Own Financing

Lease options essentially work like this. You negotiate with the seller to rent the house from them up until a certain date. At that date, you will have your credit restored and will obtain a mortgage loan and buy the property from them free and clear. Lease options usually require a substantial, non refundable, down payment/ security deposit (Usually 5-20%). If the option is exercised, then that down payment goes towards the actual purchase of the house. If it is not exercised, then the leaser forfeits the down payment. Sometimes a portion of the rent in rent to own financing goes towards the purchase of the house. This percentage will be deducted from the actual purchase price.

Seller Financing

With seller financing, the seller actually becomes the bank. Your mortgage and terms are set with them and you pay them a set interest rate for a set period of time. Very few seller financing options are available as most owners aren’t able to offer owner financing as it would trigger a due on sale clause on their mortgage loan, and if they don’t have a mortgage of their own, they may not want to take the risk to offer owner financing. With that said, there still are options out there to buy real estate by using seller financing. Some of these options even require little or no credit history, and no money down.