Do You Know What it takes to Succeed with a Lease Option?
In today’s tightening lending environment, you may be like many people who are unable to qualify for a home loan. Still, your family deserves a home they can call their own.
Many people consider a good option to conventional financing to be renting to own or lease purchasing a home.
If you are serious about buying a home, this can be a good option. However, if you dont start doing what it takes to qualify for a mortgage at the beginning if the term, a Lease Purchase can be a financial disaster.
You probably understand that a good credit score is critical to obtaining a loan approval. Times have changes and a strong income and cash to put down are no longer enough.
You need to begin repairing your credit immediately. The first thing you will want to do is pay off any current collections and pay your credit cards off.
Because part of your credit score comes from the percentage of revolving credit that is available, you want to have at least four credit cards that are not close to their limit. Your score will be higher if you owe $1,000 and have $20,000 available than if you owe $1,000 with $10,000 in available credit.
Finance company loans should be paid off as soon as possible. While bank loans will positively impact your score, (as long as they are paid on time) finance company loans actually hurt your score. This is because most people seek finance company loans when they are desperate for cash and because of this, they are considered a sign of financial weakness.
You will need to do more than just repair your credit because there are other factors which will impact your ability to qualify for a loan.
Income and job stability are key factors. You want to try to have a minimum of two years with the same employer. The exception to this is if you have changed jobs due to career advancement. This can be viewed as a positive.
Changes in available loan products have made it especially difficult for self employed individuals to qualify for a mortgage.
Historically, a large number of self-employed individuals sought out stated income mortgages. As these loans are no longer available, many are electing to do Lease Purchase transactions for two years to give them the time to document their income. It is important to do what it takes from the beginning of the lease term so that the required documentation will be in order when the time comes. Most every lender will require at least two years of documented income.
Non-citizens should be especially careful when considering a lease purchase or lease option. Significant cash and an established credit file will be critical. Even then, there is no guarantee that a mortgage will be available at the end of your lease term.
If you begin immediately working on your credit as well as other factors that will impact your mortgage approval, you can own your own home in no time!