How Veterans Can Do a Lease-Option to Buy on a Home Right Now!

By Frank Lozano, Amerisave Mortgage VA Loan Specialist

In this buyers market, you the Veteran who is a home buyer are really in the drivers seat.  There are many motivated sellers now and they are waiting for you to make a deal. 

Now for many veterans, especially those just getting out of the military,  they are not quite position yet to get a loan. They may have a credit score lower than 580 which is the current threshold to get a loan or maybe they have too much debt.  In other words, maybe their debt-to-income ratio is too high and they need time to pay the debt down to get themselves in position before they can qualify for the loan.

So what to do….well, do a Lease-Option to buy on a Home Now!  Why wait?  The market is ready for you.

Here’s what you do;

First, just know that a lease-option is an agreement between a buyer and a seller that allows the buyer to lock in the future purchase price, save money for a down payment and buy the property in the future at current prices. It can prove to be a win-win situation for everyone.  The seller gets out of his property and you get into yours now! 

Here’s how to do it….

1. Step One: Agree with the seller on a purchase price.
2. Step Two: Agree on the term of the lease. This will be the maximum length of time you want the opportunity to exercise your option to buy.
3. Step Three: Determine a market value for your monthly rent. (This is the amount a person would pay to simply rent the property.) Then add $25 to $200 per month to be applied toward the future down payment of the home. (This is not a requirement, but it helps you accumulate money for a down payment.)
4. Step Four: Agree upon terms regarding the exercise of the option, such as the escrow period and financing.
5. Step Five: Determine who will pay for inspections, work and warranties when the time comes to complete the purchase.
6. Step Six: Go to your local Board of Realtors Association or real estate company and purchase a lease-option agreement form.
7. Step Seven: Handle the transaction as a lease until you are ready to exercise the option.
8. Step Eight: Exercise the option in writing.
9. Step Nine: Open escrow or contact a real estate attorney to handle the transaction.

Tips & Warnings

    * Escrow is not required until you exercise your option to buy.

    * You may want to have a real estate attorney review the contract before you sign.

    * You may be asked to put up option money – typically $1,000 to $5,000 paid to the seller – for the privilege of having the option to buy.

    * All option and additional rent monies paid to the seller are nonrefundable if you do not exercise the option to buy.

    * You must delineate all terms of the purchase at the time you make the lease-option agreement.

    * If home prices go down, you will have to choose between buying the property at the originally agreed-upon higher price and losing the option money.