There is nothing quite like owning your own home. Not only is it a good form of investment is also a great place to raise a family. Many homeowners are well aware of ways to purchase a home including the traditional bank mortgage. However, there is another way to purchase the home of your dreams. You can buy a home using the lease option.
The lease option is basically a process by which you lease (rent) a home and have the added option of being able to purchase the home at the end of the lease term. This may allow you to purchase a home when you do not have enough money for a down payment. A lease option is also another good choice for anyone who needs to improve their credit score before getting a decent mortgage rate.
The key will be to determine whether a lease option is the best choice for you. Even though lease options are an excellent choice as a home buying tool, they may not be for everyone. There are a few questions that you should ask yourself before you decide upon a lease option for purchasing a home
The first thing that you need to discover is whether you can afford the option money. The option fee or option money is part of the lease option contract that allows it to become valid. In many cases, the upfront option money is quite small. For example, it may be from 2 to 5% of the purchase price. At the end of the lease term you will be able to apply this option money toward the down payment or purchase of the home. However, if you decide not to continue on with purchase after the lease has expired then you will not get your option money returned.
Another question to ask yourself is how long you plan to stay in a particular location. A lease option will typically cost you more than simply renting a home. Therefore, you need to be fairly certain that you will want to purchase the home at the end of the term. As mentioned previously, if you do not want to purchase a home at the end of the term then you will lose your upfront option money and any additional funds that are in excess of the fair rental value which you have paid from month-to-month.
Also ask yourself whether you will be able to secure financing when the term is up. There are sellers who will finance the home after the lease option expires. In most cases however, the buyer will need to search for their own financing by applying for a loan at a bank or mortgage institution. You may receive a more favorable loan by having a lease option but this is not a guarantee.
Finally, make sure that you are able to afford the monthly payments. The monthly payments will typically include a fair rental value plus any extra money that goes towards the purchase of the home. You may find it more economical to simply rent. Once you are in a position to purchase the previously leased home you will need to make sure that you can afford all of the added expenses of ownership. Besides mortgage payments you will also have insurance, property tax, and maintenance costs.