How to Buy Charlotte Real Estate When You Can’t Get a Loan
You may just not be in the perfect position to qualify for a home loan right now. However, this doesn’t mean you’re completely out of the housing market. Here are three ways to start your Charlotte home purchase now, without immediately obtaining a mortgage loan:
- Option to Purchase
An option to purchase is exactly that – you pay an option fee for the right to purchase Charlotte real estate at a later date (usually 1 to 2 years) at a pre-determined price. There is no rental agreement with this option.
Option to Purchase is a good alternative if you are expecting to be able to qualify for a home loan at a future date. You are not obligated to exercise the option if you change your mind; however, the option fee is not usually refundable.
One of the benefits of an option to purchase is that you may sell the option to someone else if you choose. This is a way to recoup your option money should you change your mind or if you are unable to purchase.
- Lease with Option to Purchase
This is also called a lease option. It’s generally for a term of 1 to 2 years and does include a rental agreement.
As with the option to purchase, you pay an option fee for the right to purchase the Charlotte real estate at a later date. In most cases, the option money is not refundable and is generally not applied to the purchase price.
During the option period, no one else can purchase the home but, you, also, may not assign the option to anyone else. You must exercise your right to purchase before the end of the term or the option is lost.
With a lease option, a portion of your monthly rent goes toward the purchase of the home. The rent is usually higher than a normal rental for this reason. You are not obligated to exercise the option if you change your mind.
- Lease Purchase
With a lease purchase, you ARE obligated to buy the home so make sure this is what you want to do before signing a Lease Purchase Agreement. You are generally going to pay market price or above for the home.
You pay the seller an option fee for the right to later purchase the property. The option money may be substantial. The option fee may be used toward the down payment, but this must be negotiated prior to signing the agreement.
During the term of the option, which is usually about 1 to 2 years, you agree to lease the property from the seller for a predetermined rental amount, at which time you apply for bank financing and pay the seller in full. Just like the lease option, a predetermined portion of the rent is commonly applied to the purchase price.
If you fail to fulfill the Lease Purchase Agreement, you will lose all the money you have paid, plus the seller can take you to court to get the balance of the agreement.
With all options, I highly recommend the use of a real estate agent as well as a real estate attorney. With a lease option or lease purchase, you want to do all the things you would do in a traditional sale. This includes all typical inspections and definitely a title search to make sure the home has no liens or encumbrances.
For more information on how an option works or if it is right for you, give me a call at (704)491-3310 or email me at Broker@TheCharlotteScoop.com.