Posted by Bill K. (AZ) on March 16, 1999 at 18:01:13:
Bobby,
If the seller is crediting you with $100/mo for 24 months, he/she has, theoretically, received $2,400 at the end of 2 years. They are collecting it with the monthly rent. This effectively reduces the amount you will owe when you exercise your option by $2,400.
Absolutely! That $2,400 is your equity. If your purchase price is $100,000, you owe the seller about $97,600. If the home appraises for $100,000 or more, and you can get a 98% loan based on the contract price, then YOU’RE IN!
I am trying to understand a little more about lease options.
I know that one can have a percentage of the monthly payment credited towards the purchase price of a property. I have two questions about this credit.
If I structure a L/O that will credit $100 per month for 24 months will the seller have to actually have the $2,400 in cash at the end of the 2nd year, or can/will they deduct the $2,400 from the previously agreed upon purchase price of
the property?
If the credit is deducted from the purchase price will lenders allow me to use this “equity” when I obtain a mortgage on the property?
Any helpful comments would be greatly appreciated.