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Jimmy Thompson's Blog

By Jimmy Thompson | Agent in Memphis, TN

Should a Buyer get pre approved before doing a lease/option?

Buyers who lease-purchase rarely end up buying the home. They usually cannot qualify for a loan now, so they expect they will be able to qualify after a period of time. Later, they find they still cannot qualify - whether it is because of poor credit, lack of income, too much debt, or too little savings for the down payment.

If this happens, the buyer loses any option money paid up front, and monthly payments.

A  pre- approval from the bank, (to provide a detailed look at the buyer's current financial situation) would show both Seller and Buyer a time frame when the Buyer can reasonably set a date - 6 mo, one yr, 2,  etc. - to get credit in order, increase income, lower debt, down payment...

Also,i would suggest to go ahead and obtain all the disclosures, and do your due diligence just like you would on a regular sale. --  home inspection, title policy,  appraisal, seller disclosures, pest inspections, a roof certification, home warranty plan and hiring other qualified inspectors. Just so there's no surprises later, AND to help determine a fair market value for working out price / option to buy in the future.

If you can't buy the property, a lease / purchase / option is not so cheap.
 After all that - back to square one.

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