What type of financing do I get after a lease option or owner financed home deal?
I am planning on doing a lease option or owner financed home deal with a home seller. I wanted to know would I be refinancing, doing a conventional loan or other type of financing after the terms of the deal are up. Also is it harder to get financing after a lease option or owner financed home deal. He said that I would refinance but how do I qualify for a refinance when I don’t own and just pay the seller the mortgage. Any and all your comments would be great in helping me understand this process. Also the house during the term of the deal will be put into a Land Trust. Could someone help me with my questions. Thanks.
You have two different types of financing upfront. The lease option usually sets aside a portion of each months rent as a credit towards a down payment. The problem with this is you must obtain a conventional mortgage at the end of the contract period and the lender must allow the credit that the seller is offering. In today’s lending climate, lender’s don’t like sales without big down payments although if you have been paying a monthly lease payment well above market rates they may well look favorably on the sale. It can be a dicey agreement–too many things can go wrong or simply not happen as you need them to happen.
Owner financing is a better option, in my opinion, because title is transferred to you and you are the owner. Again, at he end of the contract period you would do a conventional mortgage but it would be a refinance. If you have done a good job of paying your bills on time and you have enough equity built up in the property via either increase in value or principal pay down you should be in good shape for financing.
In either case, I strongly advise you to consult a lawyer for advice on which way to go, especially with the option idea. Good luck!!
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