Click here to start leasing to own your new home now!!
Or call 941 764 8491

Unless you have a big sack of cash to buy a house outright, most people need bank financing up front to buy a house.  Let's face it, it's just impossible to save up for it!  Unfortunately, 39% of Americans today are unable to qualify for bank financing because of many issues the main ones being proof of income, debt to income ratio and of course our old friend credit!  I have homes available now and others becoming available all the time that you can lease with an option to buy with my Lease Option program and you can get into them without any of those issues stopping you, as long as you have a modest deposit and earn enough to qualify for bank financing at some point in the future!  Even if you can buy a home but never have because you are frightened by the commitment or whatever, my Lease Option program can help you get used to it gradually and enable you to try out a home for years before you actually buy, and you can still get the leverage of fixing the price to a value in the past compared with people who are buying in the retail market at the point when you buy!  Hey, that gives you equity on the very day of closing! What do you have to loose?  Check it out...

Traditional Home Purchase

Before I describe my Lease Option program, let's look at how a traditional home purchase works so you can understand how a Lease Option is different and why it would benefit you.  Traditional home purchase requires you to be able to qualify for bank financing on day 1, period!  That means you have to already have sufficiently good credit, a reasonable deposit (20% in most cases) and be able to prove you have sufficient income to make your payments.  There are loan programs available that allow you to borrow more than 80% of the value of the home, but those have higher interest rates that make your payments even more, thus reducing the likelihood you will qualify, plus they usually require better than average credit.  So if you have any of the following problems, you can't continue:

• Poor credit
• No big 20% deposit already saved
• Unable to prove income
• Lack of income

My Lease Option program can help by assisting you with these problems as follows:

Poor Credit

If you currently have credit issues, this is not going to stop you from qualifying as long as what ever is wrong can be corrected during the lease period of two years, and most problems are easily solved.  I will have my Mortgage Broker go over your credit report and he will make recommendations as to what you need to do during the next two years to get ready for your purchase of the house.  If necessary I will recommend a Credit Counselor to help you with this.

No Big 20% deposit already saved

To qualify for a Lease Option you only need a modest deposit of around 3 - 5% of the base purchase price of the house to get started.  You will have two years to make additional savings towards your purchase and this should be possible because your monthly payments will be less than they would be, even if you could afford bank financing today with a 5% down payment.  This makes it easier to get going.

Unable to Prove Income

If you are unable to currently prove your income because maybe you work in the restaurant industry, this will not be a problem to get started, and your rent payments into the rent escrow account on the house over the two year lease period will then be sufficient proof of your ability to pay on time.

Lack of Income

At the end of the day, there is nothing I can do to increase your income or to reduce the cost of property in Northern Virginia or Maryland, so you must have sufficient income to qualify for a loan within two years.  However, if for example you are currently in a training program with your work and expect to be put onto a higher pay scale when you finish the training and that is expected within two years, then I will accept your application based on that information, as long as you can afford the required rent.

Lease Option

Let me explain to you how my lease option program works using an example of a house with a $250,000 base price (about the current minimum for a 3 bedroom single family home in this area).  All the figures I use here are values chosen just to keep the math simple, there is no particular relationship between the numbers and they are not an example of any particular real house.  A lease option is two separate agreements, a regular Lease Contract for the rental part and an Option to Buy Contract for the purchase part.

The Lease

Let's say for example that the normal market rent for our example $250,000 house is $1300 per month.  As this lease is special because it has an Option to Buy contract with it, the amount of rent will usually be above market rate for rents because it has to cover the underlying cost of the house, so let's use $1600 in this example.  Even so, the rent will always be somewhat less than you would be paying on a 95% mortgage at the same point in time.  The lease contract will also have a deposit like a normal lease equal to one months rent, so that's also a one time payment of $1600.  Later when you buy the house as the lease will end at that point, you get this returnable deposit back.  If you do not end up buying the house later on for some reason, you get this deposit back when the house is returned in good condition, but deductions will be made for any damage if any etc.  If you purchase the house as I hope you will, there will be no end of lease inspection and you always get the full refund in that case.  As usual with rents, this is subject to a small yearly increase based on market rates to cover any increase in property taxes and insurance.

The Option to Buy

The Option to buy Contract is a separate agreement that gives you an option to buy the house for a certain price at a certain time.  The option usually starts after the first year or second year.  The prices stated for each option period will depend on the median appreciation for the area where the house is located and in general I split the value of the appreciation with you, so you only have to pay half of the value of appreciation as the years of the option go by.  Let's use 10% appreciation for each year in this example so the price will only rise by 5% each option year for you.  So, after the first year the option price will be $262,500 (5% extra), after the second year it will be $275,625 (another 5% extra) and so on.  The option contract has a one time upfront payment called the Option Consideration.  This option consideration is usually 3 to 5% of the purchase price, so in our example let's use 5% which would be a one time option consideration of $12,500.  For higher end properties, the option consideration may be higher, in the region of 8-10% where the base price of the house is greater than $300,000.  When you exercise your option to buy in any year, you will receive a FULL credit equal to the option consideration against the purchase price in effect at that time.  If for some reason you do not buy the house, this option consideration is NOT refundable, but if you do not buy because you buy a different house from me or move to a new lease option with me, I WILL give you the full credit on the new house.  So all of this is geared to encourage you to buy the house which is just what you want right?  The sooner you buy, the sooner you get to use your option consideration as a credit against the purchase price and the lower the purchase price will be.

Actually buying the house!

When it comes time for you to actually buy the house at the end of the lease period (or earlier if you are ready), the properties I have available for lease options come in two main type in this regard as described below:

1. The most likely case we will be faced with to enable your purchase of the house is to fix whatever problem you currently have with getting approved for bank financing whether it be to assume an existing mortgage that requires buyer qualifying or applying for a new loan.  The main issues to correct will be proof of income, debt to income ratio, and your credit.  I will discuss each of these things with you in order to identify any weak areas and we will make a plan to fix whatever needs fixing, and believe me, it CAN all be fixed if you are focused on achieving your goal of home ownership!  The amount of financing you will need at any point is the predefined option purchase price less your option consideration credit and less any other savings you have.  If you believe you have credit issues, start working on it now!  Go to www.MyFico.com and see what it's all about!  Don't worry, we'll talk about this more, the thing is the lease option gives you the time to do all this, and remember, I will help you!
    
2. Some of the houses I have come with existing mortgages that are assumable by you with no qualifying!  That's right!  No credit check, no bank qualifying - nothing!!  When we go to closing you get the mortgage with the house lock stock and barrel!  So in this case, two things are fixed: The current balance of the mortgage and your option purchase price.  I can tell you the outstanding outstanding mortgage balance that will exist during the years you have to exercise your purchase option and you will know the purchase option prices.  All you have to do is save the difference between the purchase price and the mortgage balance less your option consideration credit and you are done!  If the amount of the deposit is too much for you to save, I can help you work out a second mortgage and I'll help you to get qualified for that as I described in (1) above.  In general, only about 10% of my houses come with a great mortgage like this and it depends entirely on what agreement I was able to achieve with the original seller of the house at the time and what kind of mortgage they had.  While there is no formal qualification required like with a bank, the original seller may still be the mortgager and will want to know that you are a reliable payer.  Usually this means that the mortgager will just want to see that you have lived in the house and have been paying well for at least a year and possibly two, so the option to buy will usually only start after the first or second year on a house with a mortgage like this, but that will give you plenty of time to save for your deposit.  There are also some cases where an older existing VA or FHA mortgage will be assumable by you without qualifying and yet more cases with newer mortgages that are assumable but with qualifying required.  At the very least even if you have to qualify, you may get a better rate and save some closing costs.  I have mortgages myself that can be assumed with qualifying, but the trouble is worth it for you at 5% for a couple of decades or so right?
    

For any given property that I offer you, I'll explain to you the exact mortgage options that come with it and together we'll make a plan for what you need to do to get ready for your purchase, and the American dream of home ownership will no longer be a dream for you!  It will be real!

Complete lease option example

Now let's look at a complete example using our $250,000 house again and assume that you purchase two years (24 months) after you started.  Let's assume that rents increase each year by 5%, so rent in the second year will be $1680.  Let's also assume that you manage to save just an extra $100 a month for all that time towards your purchase deposit.

The first table below shows all the facts of this example lease option agreement plus the current rent of $604.

The next table shows where we are after 24 months and the actual purchase price after the credits:

That's great!  Only $259,075 to pay for a house that is now worth $302,500 (250,000 plus two years of 10% appreciation), you should be feeling like a home owner already with all that equity!  Now let's assume that you have not been able to save a single extra penny in all that time apart from the example $100 a month.  You will then need a mortgage for $259,075 and remember I have been helping you to work on your credit and we can show the bank cancelled checks for all the payments into your rent escrow account plus the extra $100 a month you have been saving.  If we assume you take a 7% mortgage for the full amount amortized over 30 years, your monthly payments for interest and principal will be just $1723.63.  ^Lk!  That's $56.37 a month less than you're paying now, and now that you own your house the mortgage payment will never go up like rent does (providing you select a fixed rate loan)!  You can see the full amortization of this example mortgage at Yahoo Finance by clicking here and from there you can mess around with the numbers if you like.  This is just an example of course and I have not added closing costs to the total but I have bumped the interest rate a bit to makeup, but you get the idea right?  Also homeowners have to pay home insurance and of course property taxes which vary on a case by case basis, but these amounts are incidental compared with the mortgage.  So are you ready to get started?

Documents

So that you can become familiar with the actual documents that I will be asking you to sign if you enter into a Lease Option agreement with me, I have prepared a list of them here with brief explanations about each one and links to samples of each.  If we make an agreement together, I will go through each part of each document with you when we sign.  If you can read them here first, it will make that part of the process quicker.

Rental Application

This is just a regular rental application like you will have seen before and I will ask you to fill this in with all of your personal details.  I just use this information myself to qualify you for the lease and I keep it on file at my office whether your application is successful or not.  At the time you give me the completed application for a particular property, you will need to give me a check for the deposit amount which in the example above would be $575 and another check for $50 which I charge as an application fee.  After I get the checks, I cash them both at once.  If your application is rejected for some reason, like you can't prove your income for example, I will return the deposit amount to you.  The application fee is non refundable.

Authorization to release information

Although no specific credit rating is required to qualify you for a lease option, and I will not reject your application based on any credit information I discover, I still need my mortgage broker to run your credit report during the application process for two reasons unrelated to your actual current credit status:

1. I use the name, address history and other information in the report to compare with your rental application in order to establish that you are who you say you are and that your social security number is correct for tax purposes.  This is the exact same reason they ask you for your social security number when you apply to rent an apartment.  If there was another way of verifying this information from an independent source I would do so, but in the USA, a credit report is my only viable way to verify your personal data quickly and for a modest fee.  We can't afford a private detective for $50, right?
    
2. The whole point of a lease option is for you to be able to exercise your option to purchase the property at some point, and as I described above,  in at least 90% of cases, this means you will have to qualify for bank financing to achieve that.  So I get my mortgage broker to review your credit report now in order to determine what you will need to be doing during your lease period to get ready for that purchase.  I will review these findings with you and help you to formulate a plan to correct what ever needs to be done.  Again, without the existing credit information, I can't begin to help you with that.

Residential Lease Agreement

This is just a regular rental agreement and is based on agreements that have been prepared for me in the past by my realtor's for my regular rental properties, so you may well have seen documents before that read the exact same way that are prepared by the major real estate firms.  There is one clause that I would like to draw your attention to, which relates to repairs which is different than in a standard rental agreement where you normally just get full service from your landlord.  Now that you are on your way to becoming a homeowner, you are also on your way to being responsible for organizing any required repairs.  Repairs are divided into 3 classes:

1. Repairs required due to major damage caused by events covered by the owners buildings insurance (fire / storm etc.) will be paid for by the owner making a claim against that insurance.  You just have to call to inform me of such a problem.  Hopefully that will never happen!
    
2. I shall pay for and provide to you a home warranty insurance program for all mechanical equipment and appliances in the property.  If you get a problem with any covered item, plumbing, electrical heating or whatever, you just call the 800 number provided by the home warrantee company and you deal directly with them to get the problem fixed by their local service contractors.
    
3. For all other repair issues, you are in charge and you have to pay for it and sort it out yourself!  But that's all small easy stuff right?  This also includes any regular service required to any equipment, like changing the air filters in the air conditioner for example.  If you fail to complete these simple tasks and then you get a failure and then call the warrantee company, they may not pay for the required work if you have neglected your regular duties!  Just keep on top of these small things and everything will be fine.  I will give you a list of what you need to do.  You can always call me for advice if you need to.

Option to purchase real estate

This is the actual document that gives you the right to purchase the property for a particular price within a designated time.  The residential lease agreement described above supersedes this option to purchase and must be adhered to or the option becomes null and void.

Option to purchase disclosure

This is a statement signed by us both that makes it clear that you understand my Lease Option program and how the residential lease agreement and the option to purchase real estate agreement described above, work together to form my Lease Option program, and that I have fully answered all of your questions in relation to those documents at the time they were signed.  It also states whether I own the particular property myself or if I am leasing it from the actual current owner.

Addendum to Lease/Lease Option agreement

This is an addendum that allows me to pass on to you, any monthly payment increases that come from the underlying expenses of the ownership of the property.  This comes from things like increased property insurance premiums or housing association dues etc.  These are things that you will pay directly yourself after your purchase. 

Addendum to Option to Purchase Real Estate

This addendum describes the required actions on the part of you the optionee in order to recover 10% of your option payment in the event that you are unable or don't want to exercise your option to buy.  Basically it says that if you leave things clean & tidy, you will get a refund equivalent to 10% of your option consideration after you leave the house.

Lead-based paint disclosure

This document is a federal requirement of the Environmental Protection Agency and is also something that you will have probably seen before.  The form comes directly from the EPA website and you can see a copy by clicking here.  They also provide a booklet here that describes everything about the issues of lead-based paint.  I will complete this form as necessary according to the age and status of the property and we both sign it. Click here to find out more from the EPA about the issues of lead-based paint..

Lease Option Summary

So hopefully now you know all about my Lease Option program and all of the benefits it has for you!  If you have any questions, please let me know or call me at 941 764 8491.  Here is a summary of the main points:

• You get instant occupancy!
• You can get started with a modest option consideration that you get back when you buy!
• You get time to save for the rest of your purchase deposit!
• You get to tryout your new home with no commitment!
• You have the option to buy, but only if you want to!
• You get time to cleanup your credit!
• You get help with applying for bank financing when the time comes if needed!
• You can often qualify for a bank refinance program with easier qualification because you are already living in the house!
• You can buy for a lower price than people buying retail at the time you buy!
• You will have rent payments that are less than buying now with your 5% deposit and a mortgage in most cases!

Go ahead:
You Lease To Own !!

Click here to start leasing to own your new home now!!
Or call 941 764 8491

Click here to see currently available properties

Copyright © 2006  Adrian Kingston.  All rights reserved.  Page revised: 02/05/2009

Phone: 941 764 8491
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