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Andrew Ikeda

more information on the lease option loans

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Greetings Investors,

Thank you for your interest and questions regarding the lease option loan program.

There has been an overwhelming response and inquiries into the lease option loan program. Excerpts from the lenders webpage and guidelines with details have been included below. 2.10 and 2.12 below are for your tenant/buyers who may have some credit issues.

 

Here is a summary of the questions most frequently asked so far with answers:

•This program is targeting the tenant/buyer and not for the investor/seller.

•Interest rates and terms and other conditions will vary from state to state and client to client. (please have your tenant/buyer contact me for more information and to do a loan application).

•Minimum to Maximum Loan amounts – ask me about that – generally $100,000 to $500,000.

•Minimum credit scores are 520 on up. Keep in mind that 520 score will not get them 100% financing. 620+ for 100% financing.

•Option money and rent credits can be used toward purchase price.

•The loan amount is based off the credit score and the APPRAISED VALUE!

 

Again, if you have further questions, please contact me.

Andrew Ikeda (Mortgage/Investment Specialist)

US Funding Group

 

2.6 - Verification of Mortgage/Rent

At the time of funding all products including any Score-Driven product, the existing mortgage is expected to be current. Loans where the existing mortgage is not current at funding will be graded according to the appropriate M Series M2 - M4 guideline. (ask me for more information if needed).

 

Source Servicer Documentation required

Rent Third Party Property Mgmt Co. (apartment)

Property Mgmt Co. (non-apartment) and Private Party (landlord) Canceled checks or VOR

 

Canceled checks.

Credit score > 640, VOR acceptable

Lease Option or unrecorded Land Contract N/A Canceled checks - Treat as purchase or refi with rent credit.

Credit score > 640, VOR/VOM is acceptable. Treat as purchase.

Private Party Mortgage or recorded Land Contract 3rd Party Serviced

 

Private Party VOM or canceled checks. Treat as refi.

 

Canceled checks. Credit score > 640, VOM/VOR is OK. Treat as purchase.

Institutional 3rd Party Serviced VOM or canceled checks

 

2.10 - Installment Loans

Lender may exclude most installment accounts from DTI when there are less than 10 payments remaining, or allow pay-down to a balance equal to 10 payments in order to exclude an account from DTI. Pay-off and pay-down of accounts must be reflected on the Final HUD-1. Auto leases are always included regardless of remaining term.

 

2.12 - Bankruptcies

Bankruptcies must be discharged at or prior to closing depending on the credit grade. The look-back period varies by credit grade and may be calculated from either the discharge date or the filing date. Borrower may not have any derogatory mortgage credit after the bankruptcy for our Piggyback Program (that’s for 100% financing with the lender). For loans using the filing date, Borrowers may have no late payments to the trustee at any time during the complete bankruptcy history. Bankruptcies for borrowers who qualify for our M2, M3, or M4 programs must be discharged at closing if not earlier.

 

2.15 - Lease/Rent with Option to Purchase (Owner-occupied Only)

Payoff of a lease purchase agreement may be treated as a purchase or refinance (see Verification of Mortgage/Rent). Only the initial option payment and portion of the monthly payment that exceeds proven market rents can be applied to the down payment or closing cost (see Rent Credits).

Provide a copy of the lease agreement in the file. If canceled checks cannot be provided to document that the Borrower has made the lease payments, LTV will be based on the lesser of the purchase option price or the current appraised value, and the transaction will be treated as a purchase. If canceled checks are provided and the lease option is more than 12 months old, LTV may be based on the appraised value.

Lease option refinances may be rate/term only. No cash out (cash in hand or payoff of debt) is allowed.

 

2.16 - Rent Credits

Where the purchase option of a currently rented property is being exercised, only the amount of the rent paid in excess of proven market rents for the area may be applied toward the required down payment.

•The purchase option contract must specify the amount of each payment that will be applied to equity.

•The property appraisal must provide rent comparables to support the amount being applied to equity (fair market rent must be documented on Fannie Mae Form 1007)..

•Borrower must provide 12 months canceled checks to prove the lease existed for at least one year..

•No more than 50% of monthly rent will be applied towards down payment regardless of the contract..

 

2.18 - Mortgage/Rents Held by Private Parties

The Borrower (the tenant/buyer) must provide 12 months or 24 months canceled checks, depending on program requirements, to verify payment history. An RMCR (Residential Mortgage Credit Report) provided by you is not acceptable verification of mortgage or rent. A Verification of Mortgage/Verification of Rent is acceptable for Borrowers with qualifying credit score of 640 or higher, and for borrowers with lower credit scores when renting from an apartment complex or property management company. Cancelled checks must be provided for unrecorded land contracts and lease options.

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