Sandwhich Lease Option Question-How Tenant Qualifies

[Sierrah Fanth]

I was apprehensive to post this, because I SHOULD understand the answer by now. :roll:

In a sandwhich lease option, the tenants down payment and rent credits are non-refundable, but are applied towards their mortgage. If this money is profit for the investor and/or used for leverage in the deal...

Where does the money come from for their down payment at closing?

If they do not bring anything to closing, where does the down payment actually come from???

Is it just a matter of telling the bank "They've applied this much towards their mortgage?"

I believe it has to do with coming off of the selling price of the property, but how is that money applied, if they have not yet qualified for the loan??

Thanks in advance :wink: