Posted by JohnBoy on November 02, 1998 at 19:22:42:
It sounds like you need a different lender to work with. Is this a direct lender as in a bank? Or is this a loan broker your dealing with? If its a bank, try another one or if its a loan broker get a another one.
They’re a lot of lenders out there that will treat a l/o as a refinance instead of a purchase. The option consideration would apply as a down payment. No seller in there right mind unless they don’t have any knowledge in structuring lease options would show the option consideration as “Pre-paid down payment”. What happens if the tenant couldn’t get the financing or decided not to exercise the option? The seller could end up having to give the option money back since it said pre-down payment instead of “Non-refundable option consideration”. The option consideration is not considered a down payment but rather a fee for locking in a pre-set sale price and tying up the property for a year or longer. If the value in the property was to go up you as the tenant would get that equity as long as you exercised the option. Thats the fee you pay to the seller for locking you in on the price, not a down payment.
However, “MOST” lenders will allow that as part of the down payment when a tenant exercises the option. “Most” lenders will consider a l/o as refinancing the property the same as they do when you buy on a contract for deed. A lot of lenders will restrict the amount of the rent credits to the amount of rent paid above the market rents in the area.
You could try having the seller write up the $7800 in rent credits as a repair allowance instead of saying its a rent credit. Tell the lender you want to use the repair allowance as sweat equity. That may work better for you. If you have a problem with this lender just find another one. Try using a loan broker that has a lot of different lenders to choose from. This will save you a lot of time and frustration from jumping from one bank to the next. The loan broker will shop your loan for you and you won’t end up with a bunch of inquiries on your credit report from you going to a lot of different banks.