Without having all of the information about the rent-to-own agreement or the home purchase agreement it is challenging to answer your specific question. If a portion of your rent payments were suppose to go toward the down payment to purchase the home, according to the terms of the rent-to-own agreement, then paying below market rent is an issue. This is because the lender will not permit the money that was being saved for the down payment to be applied to the home purchase. In short, it sounds like the lender is saying no money from your monthly rent payments can be used for the down payment, which means your son needs to come up with additional funds. Again, the specific issue you are facing depends on the terms of the rent-to-own agreement and the purchase agreement as well as your loan program and the down payment required by the lender.
Your options for resolving the issue are for you to come up with additional funds, which sounds like may not be possible. Additionally, the seller can reduce the sales price, which she or he may not be willing to do, or the seller could potentially take back a seller note for all or part of the down payment. With seller financing, you agree to repay the note over a specified term but your mortgage lender must agree to the terms of the note, which it may or may not do.
Your final option is to cancel the loan and see if another lender takes a different approach. You can cancel, or rescind, your mortgage anytime prior to signing loan documents and you are free to work with another lender. While canceling your loan delays the process and you are out certain upfront closing costs, this may be the only approach to getting a mortgage.
If you decide to cancel your loan, we always recommend that you contact multiple lenders to understand how they would handle your unique situation. You can compare lenders in your area by clicking MORTGAGE RATES We advise you to contact at least four lenders as qualification guidelines vary. Be sure to explain all of the details about the rent-to-own agreement upfront when you contact lenders so there are no surprises.