Is a Lease Purchase Loan a Refinance?

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I am in a lease purchase. When I go to get a loan is it the same a refinance?


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Not anymore!  In the days of B&C loans it was allowed, now it it is treated as a purchase by Fannie, Freddie, FHA, VA & USDA.  In addition, if you are getting a credit toward the purchase with your payments, you are only allowed that amount that is above the fair market rent value determined by an appraisers rent analysis.  If it does not show you are paying more than ythe current rental value it will not be allowed regardless of your lease purchase contract agreement. 

You may be able to work something outside of closing with the seller but that’s up to the two of you and cannot be part of the contract or be shown on the HUD1 settlement statement.

Answered over 5 years ago
skipghm2
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I am assuming that you mean that you are renting a place, with an option to purchase it.  That would mean that when you exercise your option, you are a buyer of the property, and need to finance it as an acquisition, not as a refinance.

If you are actually in an installment contract of sale situation, which means that you have agreed to pay a specific price for the home, have moved in, and are paying a monthly fee, part of which goes towards the purchase price of the house, then, depending upon how long you have lived at the property (or, how long you are under contract), you may be able to refinance the property.

Answered over 5 years ago

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No, it is not the same as a refinance. A lease purchase is a deferred legal committment to consumate the transaction at an agreed upon future date. Until then you are making lease payments.

Your loan application is for a new loan to purchase the home and all of the normal requirements and qualification items apply. Normally it is permitted to purchase the home before the end of the lease period but this would depend on your particular states real estate laws and the wording in your contract for your state.

I suggest you contact a qualified lender and discuss any possible options that may pertain to your particular situation.

Answered over 5 years ago

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When you go to apply for your loan the transaction will be treated as a purchase, because you do not currently own the property.  It is also important to note that if a part of your rent has been applied to the down payment most lenders will only consider that portion above “market rental value” as a contribution to your down payment. 

For example, if the current market rental value in your area is $1,000 per month and you have been paying $1,200 per month then $200 per month will be counted towards your down payment.  In this example, if you have only been paying $1,000 per month than a lender may not consider any portion of that amount towards your down payment. 

Answered over 5 years ago
Lydia Snow
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No.  You will get a loan when you actually make a purchase of the home and it will be considered a purchase by the bank.  Prior to that, you are considered a tenant, even though you have a contract stating that you will be purchasing the home at the end of the lease term.

A lease-purchase agreement is an agreement whereby a prospective buyer agrees to lease a home from the seller for a number of months or years.  Often the rental amount is a little higher than normal market rent in that area and some buyers put down a non-refundable deposit of thousands of dollars.  In exchange the tenant/buyer has the first right to purchase the home at a set point in the future.  Sometimes the purchase price is set in advance.  Other agreements state that the future market value determines what the sales price will be.  After the correct amount of time has elapsed the buyer applies for a loan from a bank and makes the purchase.

Answered over 5 years ago

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