Exercised at month 22 with the appraisal $19k over strike, and the credits nearly didn't count
Closed three weeks ago on the house I'd been in on a lease option since spring of the year before last. Posting the numbers because I got a lot of help in here when I was reading the draft and second-guessing every clause.
What I signed: 24 month option, $7,000 option fee, strike $242k, rent $1,650 with $350 a month credited. Market rent on the street at the time was $1,425 to $1,475, so the credit was roughly the above-market piece plus a bit. Separate option document, separate lease, memorandum recorded (my state allows it, check yours). Owner kept everything above $300 per event on repairs, which mattered twice.
What happened: I exercised at month 22 because my loan officer wanted to close before an escrow reserve question got complicated. Appraisal came back $261k. Strike $242k, so $19k of built-in equity at close, plus $7,000 option fee and $7,700 of accumulated credits applied.
The part that nearly broke it: documenting the credits. My lender wanted 22 months of proof that rent was paid on time and proof of what market rent was at signing, and my first year of payments went through one payment app and the second year through a different one after the owner changed property managers. Two of the 22 months had no clean record on either. I ended up getting a signed ledger from the owner plus my own bank statements, and the underwriter took it. Requirements for how much of a rent credit can be treated as a borrower contribution vary by lender and by loan product, so anyone reading this should get their lender's version in writing at month one instead of month 20.
What I'd keep: the separate documents, the recorded memorandum, the $300 repair threshold on the owner, and paying by bank transfer with the same reference every single month so the ledger writes itself.
What I'd change: I'd have set a written checkpoint with the loan officer at month 6 and month 12 instead of trusting that my credit would keep improving on its own. It did, but I got lucky with a medical collection that fell off rather than one I fixed.