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You have to find the source to pay off the balance owed to the seller when you execute the purchase- you take out a loan assuming the value is there.
1- as far as present banking regulations go, it would be underwritten as a refinance so therefore there is no downpayment needed. The existing equity in the home would be the down. This is because you already live in the property and have been paying on it. If the house appraises for $400K and you owe the seller $300K then it would be as if you put $100K down.l
2- these guys are usually gambling on you willing to put down some extra money, and make ALL payments on time. if you blow it or fall behind they keep all the money, or worse it loses value then you're on the hook. Of course this can be negotiiated. I've seen some deals written in this manner. Pretty brutal.
3- these are typically for people who can't qualify for financing on their own. While you pay this you still count as a renter until you execute the contract so they still have to abide by landlord- tenant law (see attorney) until you finalize the transaction.
Be aware that some deeds / notes have a "due on sale" clause or some sort of acceleration if the property goes rental, so see the underlying loan documents and make sure you aren't going to get ousted if he queers it somehow - doesn't make the mortgage payments, the bank finds out it's a rental when it's supposed to be O/O or there's something in there that they f'd up - a prepayment penalty or the loan is an ARM that will adjust before your agreement expires. Make sure you have everything covered.
4- record the lease option to purchase, always pay with a personal check (NEVER CASH) and of course, never miss a payment. Save all records of payments, cancelled checks front and back as proof you have paid as agreed. Bank will require this- all copies of checks submitted for payment on the deal.
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In the movies only bad guys sleep in king size beds.
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