If the rent to own applicant or land contract will used to complete payment on a rent to own purchase or land contract, contract for deed or any other similar type FHA financing agreement in which the borrower does not have title to the property, the new arrangement may be processed as either an FHA purchase or refinance transaction with maximum FHA loan financing if the loan applicant receives no cash at closing. If all FHA loan proceeds are used to payoff the outstanding balance on the land contract and eligible repairs, renovations est. the appropriate loan the value is applied to the lesser of:

• The appraised value

or

• The total cost to acquire the home, the original purchase price, plus any documented cost the purchaser incurs for rehabilitation, repairs, renovations or weatherization plus allowable closing cost and if treated as a refinance reasonable discount points.

 Equity in the property-The  original sales price minus the amount owed may be used for the borrowers entire cash investment. however if the buyer receives more than $250 cash at closing, the loan is limited to 85% of the sum of the appraised value and allowable closing cost. Replenishment of the borrowers own cash excepted for repairs, improvements, renovation est. is not considered as cash back provided the borrower can substantiate with cancelled checks and paid receipts, all out of pock funds spent for those purposes.

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