Okay. You're qualified, entered into the lease purchase agreement and are renting to own. Your credit is in good shape and now you're ready to exercise the option to purchase. This page covers the steps regarding financing involved in becoming a homeowner. This page is divided into 2 sections: Pre-Approval and Financing. The Pre-Approval section covers the steps involved in obtaining the financing and the Financing section discusses different types of financing arrangements (e.g. "traditional" mortgages although there is a section on private lenders as well).



First off, the definition:

'Pre-approval is a more in depth assessment of the amount that a person can afford to borrow and is done by a financial institution that will state the maximum amount that it would lend to the borrower.'

It is also an evaluation of a potential borrower by a lender that determines whether the borrower qualifies for a loan from the lender, or the maximum amount that the lender would be willing to lend. The pre-approval process involves a thorough look into the income and expenses of the borrower, including a look at the borrower's credit report and score.

The pre-approval process also involves a confirmation of income and a credit check on the borrower. As long as no major income or credit changes occur between the time of pre-approval and the actual purchase of a home (e.g. the closing), the dollar amount of pre-approval can be expected to remain the same. The process may take anywhere from a few minutes (for an online lending application) to a couple of weeks. A non-refundable fee may be charged for the process.

A pre-approved mortgage is still subject to review once a specific property has been chosen, so the dollar amount is not guaranteed. A pre-approval may be lowered or even revoked if the property in question may be difficult to resell in the real estate market due to preconditions, location and other factors.

Now the reason why pre-qualification is considered "worthless" towards the actual obtaining of financing and pre-approval what you want to get is because this aforementioned pre-qualificationis based on information regarding income, assets, employment and credit report/FICO scores provided by the buyer while pre-approval consists of Uniform Residential Loan Application form 1003, credit report(s) and FICO scores, Automatic Underwriting System (AUS) findings and supporting documentation. Also, a pre-approval letter is usually good for 60-90 days.

For this reason, we recommend for you to apply for pre-approval at least 3 months prior to the option expiration date. This combined with the 6+ month "cushion" between the credit restoration completion date and the option expiration date allows enough time to exercise the option to buy and set a closing date without requiring an extension or renewal.

Also, our pre-approval process permits you to shop for a home with a higher degree of confidence. Below is a list of documents needed to allow us to establish the loan amount for which you qualify. It will also help you to meet your contingency and closing date requirements.


Mortgage Checklist


  • Federal Tax Returns: Last 2 years - complete with ALL pages and
    schedules (state returns are not needed).
  • W-2's: Last 2 years (1099's and/or K1's, if applicable).
  • Pay stubs: Most recent consecutive pay stubs (must cover
    minimum 30-day period).


  • Bank Statements: 2 months of most recent bank statements with
    ALL pages.
  • Investment/Retirement Statements: Most recent 401K and/or IRA


  • Copy of Driver's License for identity verification (Permanent
    Resident Card or Visa, if applicable).
  • Copy of gift checks and deposit slips.
  • Copy of listing and binder/contract (we can get this form for you).
  • Mortgage statement showing taxes and insurance for all properties



Next, there is the actual obtaining of the funds necessary to purchase the property. Now, this step to home ownership involves the steps after pre-approval including such things as appraisals, the financing arrangement and loan commitment (plus insurance and other closing procedures such as title searches - click here for more information on those). This section, being about financing, shall cover different types of financing arrangements/mortgages.

First, there are 2 basic types of financing arrangements which shall be refered to here as 'conventional' and 'non-conventional'. Conventional financing arrangements are those that are provided by "traditional" lending institutions such as banks and/or the government and thus adhere to strict lending regulations.

On the other hand, there are non-conventional financing arrangements. These, collectively, are refered to as 'private lenders' and consist of 'hard money lenders' and 'private money lenders'. They are private organizations, investors and/or individuals that provide financing under, what can potentially be, far less regulated terms and conditions. As such, they may lend to borrowers with credit scores less than what would be acceptable for conventional financing or may be asset based (based upon property value and not borrower credit, although often, a guarantor is still required) but there is a potential down side. With non-conventional financing in general, expect to pay higher (maybe even SUBSTANTIALLY higher) interest rates and fees (although as with like just about everything else, there are exceptions). While it is true that you can get financing with 'bad' credit and/or without credit restoration, the risk factor for the lender could be much higher and thus the costs involved rise accordingly.

Finally, our mission here at DR Investment Properties ("Dr. I") has been to find solutions for those with credit issues or otherwise. That being said, we have searched many "haystacks" for "needles", namely credit issue specialist lenders and what we have assembled here is "Dr. I's "Golden Needle" Lending Team" as these aren't just ordinary "needles" but instead, "needles" made of gold !

All lenders on our team have been pre-qualified. After all, these are "golden needles" and we aim to provide you with nothing less !

And now, a discussion of the details of these arrangements...


Golden NeedleD r. I's GOLDEN NEEDLE Lending Team

Below are our recommended lenders. Each offers something unique to get you financing where others 'no'. These include low credit score loans and down payment/closing cost assistance programs.




Carrington Mortgage Services


Why use Carrington Mortgage Services ?

  • FHA loans with credit as low as 550 (10 % down) or as low as 580 (3.5 % down).
  • VA loans (100 % financing) with credit as low as 580.



North Point Mortgage


Why use North Point Mortgage ?

  • Credit issue specialists dedicated to get you the best possible loan terms.
  • Programs available with credit as low as 600 (possibly even lower...).


HDF (Housing Development Fund)


Why use HDF (Housing Development Funds) ?

  • Home buyer counseling, education and lending services.
  • Down payment and closing cost assistance programs (650 or better credit required).
  • Investor programs.


ACC (All Credit Considered) Mortgage


Why use ACC Mortgage ?

  • Owner occupied mortgages with credit as low as 500 possible (including bankruptcies, foreclosures and short sales).
  • Investor programs.


To get in touch with any of our "golden needle" lenders,


And now on to non-conventional financing...



As mentioned earlier, non-conventional financing arrangements are also known as private lending arrangements because the lender is not a bank or lending institution of the traditional sort, but instead a private organization, investor or individual that provides financing in non-traditional ways. As also previously stated, these private lenders are generally grouped into 2 types: 'hard money lenders' and 'private money lenders'. While the 2 terms are often used interchangably, the basic difference is as follows:

Hard Money Lender - These are lenders for investment properties only, meaning non-owner occupied properties for (possible) rehab and resale only (e.g. no "holding and renting"). These loans are short term balloon loans of usually 6-24 months. The interest rate is extremely high (generally 10-18 %) and are asset based, meaning that the lender is more concerned with the property's "quick resale" After Repair Value (ARV) than the borrower's credit. However, a guarantor would still be required. A gurantor is a financial backer for the borrower (which could be the borrower(s) themselves) and must pre-qualify to be able to pay the interest payments. Depending on the lender, loans of up to about 65 % of ARV (or about 70 % of ARV for properties over $300,000) are available. Rehab funding is generally included and down payments required are usually about 15-20 % (or more), although of course, there are exceptions - some lenders may give up to 100 % purchase price and rehab cost financing (for example, Brookview Financial). Also, several points are generally charged and often, proof of funds for up to about 6 months in interest payments may be required. Because hard money lending is not for "holding and renting", it is generally unsuitable for lease purchases. However, if you are looking for non-owner occupied investment properties to rehab and resell, we recommend you to visit our other website, for more information).

Private Money Lender - A private money lender is a lender that will lend to owner occupants or landlord buyers. As with all private lenders, they are less regulated and thus, due diligence is required. Generally, private money lenders will lend anywhere from shorter term balloon loans to 15-30 year terms. Interest rates are generally in the 4-10 % range.

Yes, the interest rates and fees, etc. may be higher but remember that in the "big picture" of things, the actual high interest loan term could be around the same as the lease/option term, for in this case, the high interest loan could be re-financed to a conventional lender who would pay off the first lender and then issue a new lower interest mortgage. Instead of 'exercising the option to buy' it would be the equivalent of 'exercising the option to refinance' because being pre-qualified for a lease purchase would enable the obtaining of conventional financing (with proper credit restoration, if necessary) within the same time frame of about 1-3 years.

Private money lenders can say 'yes' when banks say 'no', that is why they're there. A private money lender could be used instead of a conventional lender or with less or no credit restoration in a lease purchase but because of the usually much higher down payment required, their services may be unsuitable for such an arrangement, necessitating either a much larger option deposit and/or a longer term (like perhaps in the 3-5 year range).

However, there is another option that can be done with a private money lender. Since these lenders often work with those with credit unacceptable to conventional lenders, such buyers would be able to buy outright and then refinance to a lower interest conventional mortgage (as discussed above). As such, the buyer is not limited to just rent-to-own/lease purchase properties and thus, the selection of properties to choose from would be much higher.

This type of arrangement is, in some respects, similar to that of seller financing except its a 3rd party that's providing the financing instead of the seller. However, because that high down payment would be due completely up front and not in possible installments as in a lease purchase through rent credits, etc., this type of transaction may not be suitable to many tenant-buyers. But, if this type of arrangement is something that suits you and you can afford it, we can help. For more information about these private money lenders and their programs, please visit our other website,

Below is a list of resources to learn more about private lenders and their non-conventional financing arrangements and also to find such lenders. Remember though, private lenders that do owner occupied loans are some of the most difficult to find and searching for them is often considered to be like "finding a needle in a haystack". However , in the case of these "needles", they're "platinum" - the most in demand, the hardest to find. We are working to find and pre-qualify such lenders. As things develop more, the websites will be updated so keep an eye out for these future updates. We can also notify you by phone or e-mail as things progress. Also, if you are an investor and wish to be a private lender, please fill out and submit our Lender's List form or CONTACT US. Also, visit the Investors page or for more information on investment opportunities that we could have for you.

  • Private Money Lending Guide (PMLG) - A very good educational resource regarding private lenders both for borrowers AND for investors that wish to BECOME private lenders. They are also a private lender resource for lenders across the country (including CT) for a wide variety of loans (30 types in all).
  • American Association of Private Lenders (AAPL) - The AAPL was founded with a code of ethics with the principles of excellence, education, cooperation and accountibility to represent private lenders, mortgage fund managers, brokers and service providers. Again, if you are a borrower in search of a private lender or an investor who wishes to become a private lender then we recommend for you to visit this site.
  • Private Money Goldmine - A private lender referral service specializing in finding those "needles in haystacks" all across the country (including CT). Their service is not free ($97 up front + $29/month) but they have a money back guarantee if unable to borrow from any of the lenders that they provide. They are a reputable company with strong core values (click here - for more information).
  • Hard Money Hunt - A directory of hard money and private money lenders across the country (including Connecticut). It is from this site that we found and pre-qualified the first "needle" in CT - ACC Mortgage .



So, when you're ready to buy that home you've been renting to own,


and we'll get you started on the pre-approval and financing process !!!