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Purchase by a Lease to Own arrangement in Florida

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Purchase by a Lease to Own arrangement in Florida

My husband and I are considering moving into a home owned by a very credible realtor and entering into a lease to own arrangement.  The home is in an excellent area of Florida and an area that has seen a steep drop in housing costs over the past six months.  The home is priced at $349,000 whereas similar homes are on the market for $430,000 but are clearly not selling at this price.  We would essentially put $9,000 down and pay a $1,500 rent and a $300.00 payment toward a down payment for a purchase a year later.  My question is that I read that you do a kind of re-finance when you buy a home in this manner and this confuses me as I thought we would get our own independent loan for this deal.  Can you explain the process and why it is called a refinance when we don't own the property.  Also, with perfect payments in the home along with a 10% down payment is a no-doc loan easy enough to get or have they been eliminated with the sub prime credit loan fallout?  The realtor clearly wants to unload this home and we are interested in the home for atleast a three to five year commitment.  We would need to do a no doc as I have good credit but no income and my husband has a good salary but horrible credit.  The area is Ponte Vedra, FL and the home is in a well respected community by the ocean, so we truly feel this is a good opportunity for us.  Thanks for the feedback. 
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Valued Contributor

Re: Purchase by a Lease to Own arrangement in Florida

What you are describing reminds me of an assumption (non-qual assumptions are a thing of the past - don't exist nowadays) so basically you would be taking over her mortgage at the amount of the mortgage plus some (perhaps). The same bank would hold the mortgage (so, in a way it is a re-fi for them) but you would have to qualify under that particular program.
 
The foreclosure and event he 120 lates will kill your DH's credit for a long time.  Wells Fargo has an alternative program that uses 6 months of bank statements as 'proof of income' - rates aren't great and I think it requires a min of 5% down.
 
I'll let one of the mortgage guys address the other issues.
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Super Contributor

Re: Purchase by a Lease to Own arrangement in Florida

No doc (no employment, income or assets) requires 20% down/equity... down the road they could be completely eliminated, I wouldn't make plans on qualifying for a product like that.  The way a refinance would work is essentially the "option price" is used as the payoff amount, you aren't refinancing, lenders just treat it as a refinance when it comes to qualifying... meaning the current appraised value can be used instead of the option price.  You need to have a recorded land contract & at least a 12 month payment history in order for it to work, and you risk the chance of that guideline being different when you go to execute your option.
 
Make sure you have the option to purchase it at the current appraised value rather than the agreed upon option price, if the home doesn't appraise out at the option price it doesn't matter what type of arrangement you've had... the appraised value will be used by the lender.
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