Rent Credits

[pilot76180 51]

Let me preface this with the fact that lending guidelines and what the lenders look at have tightened quite a bit....

If your OTP mentions a rent credit, it is very likely the lender will look at rent rates, and the rent credit would need to be ABOVE the rent rate.

Our contracts do not mention a rent credit, just a concession, and it is applied towards fund to purchase. (closing costs)

The option money will apply towards the 3.5% required FHA down payment requirement, assuming your documents reflect this.

If you reduce the price of the house by the rent credits, and the option price, then the buyer now needs to start from scratch having 3.5% down for FHA, and may need an additional 3-4% for closing costs.

[BTI 7]

I never give rent credits on my personal deals. If I am going to give a "credit" I have market rent due each month plus an option payment that extends the option and all option money paid to date shall be deemed down payment money in escrow contingent upon exercising of the option in a timely manner and the close of escrow. T/B feels better about higher "rent" and it keeps their mindset up as to being future owners and not renters. Failure to pay the option money terminates the option and the lease.

[<Steve> 82]

FHA = For those wHo can't Afford a mortgage.

 

Home buyers should be putting 10% to 20% down anyway. If a buyer can barely afford 3.5% down and cannot pay closing cost, as a lender that would be a huge red flag. But later when the buyer can’t make the payments FHA will turn to the tax payer for the bail out. Oh those smart gov’ment regulations; bankers lov'em.

 

I just can’t give up high rent credits and having the t/b pay all closing cost too. High rent credits are a great marketing tool. And the Advantage of no closing cost helps in negotiating with the seller. But I’m stubborn. In the L/O agreements it states that any changes to the agreements will be put in writing. So, when the terms of the L/O agreements have been met, if needed, the seller and buyer can enter into a simple purchase agreement that now has the new lower purchase price. As allowed, the assignment fee/option consideration becomes part of the down payment. If the seller agrees to pay the buyer’s closing cost, the lower purchase price increases by that amount. So the rent credits are essentially being used for closing cost.