The basic way this plan works is by offering home buyers a chance. It gives the opportunity for someone to purchase a home, when they can’t qualify for a loan. Their goal must then be to be able to qualify for a loan before there times runs out. The benefit of this plan is so that they can build some credit or build equity in the time being. Some people believe if they pay their monthly rent on time, their credit rating would increase, this is not the case. Rent payments don’t effect credit ratings. If they have credit cards and other loans, they should set their mind on that and continue to make timely payments. The buyer should be aware of everything. The buyer should read and understand all documents prior to agreement and signing the documents. This one mistake has lead to many problems in the past, giving the buyer a bad situation to handle. There can be some benefits for the seller as well, if they pursue a lease purchase plan to sell. If they are not desperate on cash and can hold onto the property, they can take up this option. The seller will be bale to earn the “lease purchase fee” & “rent premium payed monthly”. An top if this great advantage, they will be given a tax reduction on their monthly mortgage interest payments, which is extremely overwhelming. Keep in mind, this is only for the set period of time.

A lease purchase can also be defined as a plan which allows you to lease a home, with the ability to purchase it with-in a set period of time. The time frame will usually be in the first three years and the price will be agreed upon in the agreement signing in the commencement. There is a down payment which will be required in the commencement, which is usually in between 1% and 5%. The buyer will be paying a rent and a rent premium to control the purchase. This type of a deal can be made so that the buyer/seller will profit.

Should I Rent or Buy?