skrealestate8 0 Report post Posted July 16, 2011 Hi Everyone!I read somewhere that most lenders only allow rent credits above fair market rent to count towards the downpayment. So if the fair market rent is $1000 and the tenant/buyer pays $1300 in rent only $300 would be allow towards the downpayment . Is that true? Thanks in advance for any replies. Share this post Link to post Share on other sites
MichaelC 160 Report post Posted July 16, 2011 Rent credits being applied towards the down payment have, for the most part, gone the way of the T-Rex. It is a rare lender, indeed, who allows that. Instead, the rent credits can be applied towards the purchase price that is agreed to on the Option to Purchase Agreement. So, if the purchase price reads $250K and the rent credits equal $10K, then the purchase price would be adjusted downward to $240K. Share this post Link to post Share on other sites
bwalston 1 Report post Posted July 19, 2011 Hi Everyone!I read somewhere that most lenders only allow rent credits above fair market rent to count towards the downpayment. So if the fair market rent is $1000 and the tenant/buyer pays $1300 in rent only $300 would be allow towards the downpayment . Is that true? Thanks in advance for any replies.I agree with MC that most lenders are no longer allowing any of the designated rent credits apply to downpayment. I run across one now and then (mostly "local" lenders) but they are few and far between. That being said, ALL of the option fee and rent credits allowed by contract can be applied to the purchase price. They show up on the HUD-1 as seller concessions. Share this post Link to post Share on other sites
Shar NJ 1 Report post Posted July 21, 2011 I had a meeting today with the Vice President of a mortgage company. He said option money and rent credits CAN be applied towards down payment if the deal is structured right i.e. a seperate escrow account would have to be set up with the option money and credits deposited monthly into the account. I have his contact info if anyone wants it, he does business New Jersey, Pennsylvania, Delaware, Connecticut, Maryland, North Carolina, Michigan andsoon – South Carolina, Virginia, Florida. However I can't see how it behooves us as investors to set it up this way. It seems to me it is simpler and more profitable to apply it towards the purchase price. Thoughts? Share this post Link to post Share on other sites
bwalston 1 Report post Posted July 21, 2011 I had a meeting today with the Vice President of a mortgage company. He said option money and rent credits CAN be applied towards down payment if the deal is structured right i.e. a seperate escrow account would have to be set up with the option money and credits deposited monthly into the account.No thoughts, but a question. Does he propose that the money just sit there in escrow until closing? If so, I can tell you absolutely it would be applied to the down payment because the actual cash is there waiting to be used as part of the closing funds. So tell me, if the option money is going into a separate escrow account, and assuming that this is a CA, how do YOU get paid? And if the "credit" portion of the rent is going into escrow the seller/landlord is being deprived of that amount of cash each month during the option period. I MUCH prefer pocketing the option consideration as my fee and having the seller/landlord receive all the monthly rent (including the portion allocated as rent credit). I'll take my chances on my broker finding a lender who will allow the option and/or credits be applied to down payment. If he can't, then they will be applied to purchase price and be shown as seller concessions on the HUD-1. There's no way I would let that money sit in an escrow account. But that's just me :-) Share this post Link to post Share on other sites
MichaelC 160 Report post Posted July 21, 2011 No thoughts, but a question. Does he propose that the money just sit there in escrow until closing? If so, I can tell you absolutely it would be applied to the down payment because the actual cash is there waiting to be used as part of the closing funds. So tell me, if the option money is going into a separate escrow account, and assuming that this is a CA, how do YOU get paid? And if the "credit" portion of the rent is going into escrow the seller/landlord is being deprived of that amount of cash each month during the option period. I MUCH prefer pocketing the option consideration as my fee and having the seller/landlord receive all the monthly rent (including the portion allocated as rent credit). I'll take my chances on my broker finding a lender who will allow the option and/or credits be applied to down payment. If he can't, then they will be applied to purchase price and be shown as seller concessions on the HUD-1. There's no way I would let that money sit in an escrow account. But that's just me :-)My sentiments exactly. Share this post Link to post Share on other sites
