Can rent payments be applied to or credited towards the purchase price of a home?
If the purpose of applying or crediting the rent to the purchase price is to lower the buyer's minimum investment in the home the answer is no. Only the rent payments that exceed the fair market rent may be used to meet a buyer's required down payment. Here are the guidelines for FHA loans from the Underwriting Handbook 4155.1 Rev 5:
" Rent Credit. The cumulative amount of the rental payments that exceed the appraiser's estimate of fair market rent may be considered accumulation of the borrower's cash investment. Both the rent-with-option-to-purchase agreement and the appraiser's estimate of market rent must be included in the endorsement package."
"Conversely, if the sales agreement reveals that the renter has been living in the property (or one owned by the seller) rent-free, or that an agreement was made allowing the renter to occupy at a rental amount considerably below fair market value in anticipation of eventual purchase of the property, this situation must be treated as an inducement to purchase with an appropriate reduction to the mortgage." - 4155.1 Rev 5 Chapter 2, Section 3, 2-10 N.