Answer No. 1
Lease options are a way to buy and sell homes without an immediate conventional mortgage. It gives buyers who can’t qualify for a mortgage right now the opportunity to get into a home now, while they improve their credit and build up a down payment while living in the home. The benefits that a buyer holds are-
- The buyers can get into a home now, even if they can’t currently qualify for a mortgage.
- The buyer can improve their credit and build up a down payment, while they are already living in their future home.
- They are not obligated to purchase the home at the end of the option if they decide- that this home ownership is not for them, the home is not right for them or if the real estate market changes significantly.
The risk that a buyer hold are-
- The price will be decided at the beginning of the lease.
- The tenant will pay for the “option to buy” the home – that is in the form of a non-refundable deposit either given upfront or as an amount of rent over and above the normal rent.
- The buyer doesn’t have to buy, but the seller has to sell. That’s why the buyer would forfeit the deposit – they are paying for that “option” to walk away. If they cannot buy the home for whatever reason as they don’t qualify for a loan – they will lose their upfront money.
Answer No. 2
The benefits and risk for a buyer are that Lease option is a great way to buy yourself some time to work on your credit or save more money for a down payment. It’s also a great hedge against varying prices- you lock in your purchase price now, so if they go up, you’re protected. But it’s an option to buy, not a promise to buy, so if prices go down significantly during the term of your lease, you can try to renegotiate your price when it’s time to buy.
Answer No. 3
The risk for the buyer are–
Individuals who attempt to buy homes on a lease-option rarely end up buying the home. There are several reasons they try to buy on a lease-option. They usually cannot qualify for a home loan and they expect that after a period of time they will be able to qualify. Later, they find they still cannot qualify whether it is because of poor credit, lack of savings, or lack of income to have a large enough down payments. If this happens, the buyer may lose any option money he might have paid up front or as part of your monthly payment.
The benefits for the buyer are–
- Faster equity growth.
- Rent money is working towards purchase.
- Option money is credited towards purchase.
- Minimum cash out of pocket.
- Frequently no down payment at close.
- Profits from appreciation.
- Possible sale for a profit.
- Increased buying power.
- Credit problems okay.
- No lengthy escrows or mortgage approvals.
- Control of the home.
- No taxes, less liability.
- Quick move in time.
- Maximum leverage.
- Minimal maintenance.
- Peace of mind.