How Does the Lease Purchase Work

New Cities found buyers for its homes, yet they lacked money for a down payment. These buyers were counseled about home ownership. Next, Suburban Federal qualified them for a mortgage. The buyers then signed a lease-purchase agreement for their homes, moved in, and began making rental payments large enough to cover their future PITI plus $100 to $200 a month extra. After these extra payments (called rent credits) had built up enough to fund a 5 percent down payment, Suburban Federal closed the homebuyers' loans and New Cities Development conveyed title. These families moved smoothly from leasing to owning.

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