Lease / Purchase Refinance in 6-12 mos? HOW??

[Anonymous]

Hi there. Hoping someone can help me.

Need to know how you contract on a house that is for sale with a lease purchase. Key is we want to be able to get mortgage as a refinance in 12 months.

Can we use the lease/purchase contract? Does a portion of the rent have to go toward the home purchase?

What are the things we need to do up front to ensure we can best easily finance in a year? Scores should be 700's by then for hubby and mid to upper 600's for me.

Need to do this within the next 2 wks. Looking at houses this afternoon. Any help that can be provided will be MUCH appreciated!!

[Anonymous]

I think you are wanting a contract for deed. One thing to keep in mind is that the seller will want you to have a LARGE chunk of cash down. Maybe 50% even.

That's all I know about the contract for deed. Maybe someone can assist you more.

[ShanetheMortgageMan]

You need a recorded land contract with the county - then after 12 months of on time payments the lender will treat it as a refinance instead of a purchase.

The portion of rent that is paid above the "market rent rate" (determined by an appraiser at the time the mortgage transaction is faciliated) may go towards reducing the principal balance owed only if you have also structured the land contract that way as well - so say the market rent rate is $1k/mo and you are paying $950/mo, it doesn't matter if the land contract says $100/mo will be applied towards reducing the principal - the lender won't accept it.  You can switch the $100/mo towards the down payment to a $100/mo credit towards closing costs though.

The best way to insure you will get financing is to make sure you agree on a sales price no higher than the appraised value when you go for the financing... I have seen several land contract's that lock a buyer in a certain sales price regardless if the home appraises for that much or not when it comes time to cash in on the land contract.  Lenders use the lower of the sales price or the appraised value, so in these situations the buyer has to come in with the difference between the sales price & appraised value on top of whatever their down payment requirement is.  So if the sales price was $150k and the appraised value is $140k and the lender requires a 3% down payment - then the buyer has to bring in the $10k difference between appraised value/sales price + 3% down on the $140k value.  So in the land contract be sure to structure it as the sales price being the lower of the "agreed upon sales price or the appraised value at the time financing is obtained".  Land contract's were not originally designed to benefit the buyer, but as an investment tool for sellers who are looking to get their homes occupied/rent paid... but these days, with proper structuring, they can be beneficial to both parties.