You are desperate!
Your Credit or Finances, or both, will not allow you to go the conventional route:
You need the Seller to help you out!
The Seller will know it, and you are going to pay dearly for this service:
There aren't too many altruistic Sellers out there.
The terms that can be written into a Lease/Option can be dangerous to you:
How long is the Option period?
How much money are you putting in to the Option?
What happens if you are not able to execute the Option?
How do you know what your financial situation will be 2-5 years from now?
How much is the rent in the meantime?
Who will be responsible for maintenance and repair in the meantime?
What will be the Market Value of the home in 2-5 years?
What will be the Selling price 2-5 years from now?
This is the Ultimate Caveat Emptor!
Good luck and May God bless
Lease options are difficult to find and may not be your best option.
To begin with, there are two documents drawn up, a lease or rental agreement that outlines the use, monthly rent and responsibilities of the tenants / landlord.
The Option is a second document, Typically 18 months to 24 months. The option requires money down, this amount can be a few thousand dollars to 10% or 20% of the agreed purchase price. It may not be refundable, it depends upon the contract.
At the end of 18 or 24 months the Option must be exercise similar to a balloon note and the buyer either buys the property or loses their option money.
During the 18 / 24 months there may be additional money that can / is added to the Option funds. which are funds collected by the Seller above and beyond the monthly rental amount.
Some Lease Options, shift the property repairs and maintenance to the Option holder during the 18 to 24 months. Thus, if the air conditioner breaks down and needs to be replaced then the option holder replaces the air conditioning unit same as if they were an owner.
On the anniversary of the 18 or 24 month Option if the buyer (Option holder) can not obtain financing or chooses not to exercise their Option then. The property is on the fair open market to be sold to another buyer.
Up north, a contract for deed is more typically used, however, here it is not as popular.
Please keep in mind that at the start of the Option, you and the Seller may negotiate a future price. If that price is under current market in 18 to 24 months then good for you, if it is higher then current market conditions then you will over pay for the property and may encounter appraisal issues.
Lastly, as of 1/1/2014, the Dodd Frank law has stepped in and now requires Seller financing regulations to meet the current mortgage lending regulations and laws. This new law carries heavy fine penalties for the Seller if not complied with or the Seller was unaware of it (no excuse). This new law has had a surprise for many Investors that utilize Seller financing. This factor may also complicate your ability to find lease option properties.
Visit http://www.brockrealtyinc.com where you can sign up for a FREE account which allows you to search the MLS in real time and receive morning reports on new listings, current pendings and recent solds.
However, borrowers who's short sale was the result of a "documented extenuating circumstance" may be eligible for financing in as little as one year from the event.
Someone already posted a number of excellent reasons as to why you should avoid a lease-option purchase, so I won't repeat them.
Your best option, financially speaking, may be to work on your credit scores for the next year and, in the meantime, get in contact with a local lender or mortgage broker who handles a lot of FHA loans and see where you stand regarding FHA financing in the not too far off future.
Diane Christner, Realtor, GRI, SFR, CNE
I know how to set them up the right way, but I'm not a realtor.
What price range home and how much Option Money can you invest?
Michael Saunders & Co.
Rather than seek a realtor, look into a mortgage broker and possibly a credit repair company. There are strategies that you can follow that will help you to re build your credit.
Wishing you the best of luck with your endeavor
Brock Realty Inc.
Jim Soda ... TheSodaGroup.com
Keller Williams Realty
Lakewood Ranch-Sarasota Area