What is a lease option?
An agreement that gives a renter the choice to purchase a property during or at the end of the rental period. As long as the lease option period is in effect, the landlord/seller may not offer the property for sale to anyone else.
When the term expires, the renter must either exercise or forfeit the purchase option. A lease option gives a renter/potential buyer more flexibility than a lease-purchase agreement, which requires the renter to purchase the property at the end of the rental period.
*Answer courtesy of Investopedia
What makes the Lost Boys Project program unique?
Our Lease Option Contract clearly identifies our obligation to sell the property to the buyer as long as they fulfill their obligations in the agreement. Here’s why:
- If the buyer cannot obtain outside financing in most cases we are able to give them a loan to complete their purchase of the property at the end of the Lease Option period.
- We use a title company in every transaction as a neutral third party to oversee the sales process.
- We use a Note and Deed of Trust instead of an Agreement for Sale.
- A portion of every lease option payment goes towards loan principle so buyer is building equity from day one as long as the buyer does not default on their obligations.
- At the end of the option period, assuming the buyer meets all borrowing criteria, title is then transferred to the buyer.
What are your typical lease-option program terms?
If we approve your client for seller financing we may be willing to be a lender for 5 years with the following terms (subject to change):
- 9.625% fixed interest rate for the first 5 years
- Minimum $4,000 down
- 20 year amortized loan
- Lease option period for first 13-24 months (See why
- our buyers are happy with our lease options below)
- Loan review (balloon) in 5 years (with possible
What is seller financing?
A real estate agreement where financing provided by the seller is included in the purchase price. It is also known as a purchase-money mortgage. A purchase-money mortgage is a mortgage given to the seller as part of the buyer’s consideration for the purchase of the property and is delivered at the same time that the real property is transferred as a simultaneous part of the transaction.
Seller financing is usually implemented when the buyer does not have the necessary credit to purchase the home. It can be an incentive for the potential buyer to purchase the property, and can be done when a buyer cannot qualify for a traditional mortgage.
*Answer courtesy of Investopedia
What do you consider when analyzing a new buyer?
Some of the things we consider are:
- Proof of income: Household combined income must be at least 3 times the monthly loan payment. (Need check stubs and/or bank statements for proof and then eventually submit this info with offer)
- Credit: Less than perfect credit is okay, but we prefer buyers that have only one or two major negative events on their credit versus a consistent history of irresponsible borrowing and bill paying.
- Term: Buyer should be able to qualify for a new conventional loan within 3-5 years.
- Background: No criminal history or outstanding judgments.
- Identification: Must have an official form of ID. Driver’s License, Passport, State issued license, Military, etc.
What else should I be aware of?
- As in any real estate transaction, we do not guarantee the house will rise in value.
- We like to ensure our buyers fully understand how our program works and encourage every buyer to seek legal advice before making any financial commitments.
- We are a direct source, private lender and investor. We are not associated or affiliated with any regulatory agency in any state. Although we work with licensed mortgage brokers, we do not hold any mortgage broker or mortgage banker licenses and we do not subscribe to any governing policies or limitations that conventional lenders might adhere to or be restricted by.
- Although we may consider loan extensions depending on payment history we do NOT guarantee loan extensions beyond the initial 5-year term.
- All deposits and closing funds collected from buyers need to be in the form of cashier checks and money orders.
- All sales are ‘AS-IS’ sales so be sure not to make any promises about condition, work being done, etc.
- We do NOT have a prepayment penalty for paying our loan off before our 5-year review. In fact, we encourage buyers to build their credit and enjoy a lower interest rate elsewhere
- We will give the buyer a title report upon acceptance of term sheet. We will turn on the utilities and allow for a full inspection period of 5 days. If your buyer is dissatisfied with anything on the title report they can terminate the transaction. All deposit money will be fully refunded at that time.
- We are only interested in WIN-WIN transactions. We are pleased that we have many satisfied buyers and agents at this time and look forward to your involvement. Many of our buyers have referred friends and family to us, which is the highest compliment a business can receive.
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