Sell Your Property Using Rent Credit

In this time of  investing it sometimes can be a daunting task to get a property sold. Have you  considered owner financing of some sort? You may be on the right track.

Rent credit for option to purchase is an acceptable source of funds toward the down payment or minimum borrower contribution. Borrowers are not required to make a minimum borrower contribution from their own funds in order for the rental payments to be credited toward the down payment.

It can be a great tool in making that sale. Not only will it help your exit strategy, it will be attractive to the buyer and help them qualify for the loan request made to the underwritinng institution(the bank).

However the loan will most likely be sold to the secondary market, Fannie Mae, Freddie Mac, etc...at the time of refinance, once the buyer gets their credit risk lowered.

  In order for this to happen there are gudelines that have to be followed.

1. A copy of the rental/purchase agreement evidencing a minimum original term of at least 12 months, clearly stating the monthly rental amount and specifying the terms of the lease will be needed.

2. Your buyer will also need copies of the canceled checks or money order receipts for the last 12 months evidencing the rental payments.

3. Market rent as determined by the subject property appraisal may be needed, because credit for the down payment is determined by calculating the difference between the market rent and the actual rent paid for the last 12 months.

For example if market rents are $650 and your buyer is paying $750 then $100 will be allowed toward the downpayment.

While there may be some flexibility, I have seen sellers trying to credit the whole months rent toward the downpaymnet and let me tell you this will not happen. As a matter of fact as edgy as underwriters are these days it may get you a solid turn down.

Using this strategy may allow you to ask more for the property, and attract more buyers. It will assist them in getting that loan down the road, which will put cash in your pocket. Just help them understand they will need to keep good records in order to provide the needed documents to the lending institution.