My property is in Chicago and my tenant rented the home with option to buy.

The Fannie Mae Guidelines are basically identical to the FHA Guidelines on the question of "Rent Credit". Here is the actual wording from the Fannie Mae Selling Guide just so you can see what it actually says:Rent Credit for Option to PurchaseRent credit for option to purchase is an acceptable source of funds toward the down payment or minimum borrower contribution. Borrowers are not required to make a minimum borrower contribution from their own funds in order for the rental payments to be credited toward thedown payment.Credit for the down payment is determined by calculating the difference between the market rent and the actual rent paid for the last 12 months. The market rent is determined by the appraiser the appraisal for the subject property.Documentation RequirementsThe lender must obtain the following documentation:o A copy of the rental/purchase agreement evidencing a minimum original term of at least 12 months, clearly stating the monthly rental amount and specifying the terms of the lease.o Copies of the borrower's canceled checks or money order receipts for the last 12 months evidencing the rental payments.o Market rent as determined by the subject property appraisal.It's very clear and to the point. The only way to use a "Rent Credit" is to have the rental payment at a higher amount than the typical market rent for the area and property type. In the end, unless a renter fees he/she is going to lock into a good price for the property they are buying, it makes no financial sense to pay more for rent just to have it applied to their eventual down payment, assuming they exercise the option to purchase! If you have other questions or want to run some scenarios by me, I'd be happy to help you! Thank you and enjoy the day!

It depends on which loan product your tenant is using for financing.. If he is using FHA, then NO!.. FHA will not allow any proceeds from a rent to own, lease option, or purchase option to be used as down payment.. You can use it to reduce the price, but it will not be considered as "Down Payment" the borrower will need 3.5% down... The guidelines are VERY clear on this exact practice.. Also, with conventional financing, there is the possibility if you can prove that you have been charging MORE than the market rent for that home in that area, supported by an appraiser.. Then you might be able to use those additional funds, but only if you need it to get to a total of 20% down payment.. if your tenant does not intend to put 20% down, then he will need to have mortgage insurance on his loan, and most MI companies will not allow these type of "Rent to Own Proceeds" to be considered as down payment.. Bottom line.. Those monies do not exist.. Now, you can pay his closing costs up to 6% on FHA and up to 9% conventional (LTV <=75%)... I'm a Broker here in Scottsdale AZ and I only lend in Arizona. If you or someone you know is looking for financing options, feel free to contact me or pass along my information. 480-287-5714 WilliamAcres.com

You are correct. So, if you haven't written an excess "towards down payment" amount in the lease you may want to do that soon. Excess funds over the prevalent market rent can indeed be used as a down payment. Also, if your tenant is having trouble coming up with the down payment, they could explore the IHDA Smart Move loan which provides down payment assistance. There are income limits, but they are very generous. If you or your tenant would like more information, please feel free to contact me. I am a licensed lender in Illinois. 1st Advantage Mortgage - barb.lanis@1amllc.com

That is correct Mario. It also needs to be stated in the contract.

It depends on how your contract was written. if you specified that it would be used as a down payment then it can.

diffrent lenders will give you diffrent answers.... it also depends on the type of loan the tenant is utilizing for the purchase

I wouldn't expect to find a lender to allow anything other than excess rent to be allowed toward the downpayment, my guess is that an underwriter who allowed it would get their "wrist slapped" if the loan were reviewed. You can certainly pay toward closing costs up to the limit of what is allowed for the type of loan.

In most cases that is correct but it depends on type of loan and also lender overlays.You need to get with an lender and see what can be done.