“Im saving up money for a down payment, but Id like to get into a house now since prices are so attractive and there are so many homes for sale to
choose from. What do you think of getting a home on a lease-option?”
***ANSWER:
There are some +s and s, that Ill go over in a moment. But first, be aware that even with the subprime meltdown, you can still get a zero-down loan
up to $417,000 if you have good credit.
=== Upsides To Lease/Options: ===
1. Buy Now
Youre able to have the right to buy a home, even if youre not able or willing to buy it right now.
2. Less At Risk
At the end of the lease/option term, if you decide you dont want the home, you can walk away, losing only the option money and any excess rent
you paid.
=== Downsides To Lease/Options: ===
1. Hard To Find
Few sellers will sell under a lease/option
2. Complex
Lease options are complex. Do the contracts correctly now or go to court later.
3. Loss Of Option Money
If you dont exercise your option, you lose your up-front option money and any extra rent you paid.
4. Lease/Options Are Erased If The Home Is Foreclosed!
One of our bank-clients just assigned us a foreclosure where the tenant had a lease/option. We had to break the news that his lease/option was kaput
and his option money gone. While I know of no protection against this, you should at least file a Request for Notice of Default and Request for Notice
of Delinquency so you know if the seller stopped paying his mortgage, letting you decide if youll stop paying your rent.
