How to Decide if a Lease Option on a Home Will Work For You
A lease option is an alternative way of purchasing a home. There are benefits for both the buyers and the sellers. Basically, a contract is drawn which states that the buyers can purchase the home for a specified price after a certain amount of time. In the mean time, a consideration fee and rent is paid each month to the sellers. Once the specified time has expired, the buyers can decide if they will purchase or forfeit their consideration fee. There are certain things you should consider when you are deciding if a lease option is right for you.
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Instructions
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Decide if you are 100% ready to purchase a home or if you need some time to decide. If you are the type of person who likes to jump in with both feet, a lease option may not be right for you. If you like to test drive a car several times before you buy, a lease option is perfect.
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Pull your checkbook and bank statements. Decide if you have enough money for a conventional downpayment. The consideration fee given to the sellers at the beginning of a lease option is considerably less than a conventional downpayment. If you simply don't have the cash for a conventional downpayment, a lease option is a great alternative until you do have the money.
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Research the housing market. Contracts for lease options can be over one year long. Lease options are much more desirable in booming housing markets because the value of your house could skyrocket before you even purchase it. On the flip side, lease options are undesirable in a soft market.
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Decide if your financial situation is stable or a little shaky. Will you likely be laid off? Will you be getting a new career soon? These are all things to consider when purchasing a lease option. Lease options offer protection if your financial bubble breaks.
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Pull your credit score. If your credit score is less than 675, it needs some work. If you attempt to get a conventional loan for poor credit, your interest rate will be very high. Instead, use the time a lease option provides to boost your credit score.
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Tips & Warnings
Take the time to meet your neighbors during the lease option. These will be the folks you live beside forever.
You will not get your consideration fee returned if you back out of the sale.
