Land Contracts. A Good Deal or a Potential Disaster?
While buying a house on Land Contract sounds like a great idea, here are a few potential pitfalls to think about:
There are a few things to consider before going after a land contract home.
First, they usually require a 20% down payment or more. Most of the time, the lack of funds is the reason that you can't get a mortgage in the first place. The homeowner will require a credit check, references, W-2's, etc, just like a mortgage company would. So, if you've recently had a bankruptcy or foreclosure, it's going to be extremely hard for the seller to take a risk on you.
Second, will you keep second guessing your decision? It's not like renting. If you leave, you'll be out the monthly payments, your substantial down payment and could be sued by the original owner for not purchasing, because you already have a legal contract in place.
Third, what if the original owner stops making payments and your "new house" gets forecloses on? The bank/investor who holds the mortgage on the property doesn't care that you've been making payments to the owner, they just know that they weren't getting them. After the third missed payment, the foreclosure process starts. The only way to save the house after that is to pay the entire loan off before the redemption period is over.
"Land Contract" seems to be the latest buzz-word. If you want to buy a house, give me a call or send an email and we can talk. I have a few lenders that can check your credit and if it's not up to par, they'll let you know what to do to get your scores up in the least amount of time so you can buy a house as soon as possible. If you still want to buy a house on Land Contract, we can work with you on that, too.
*This is a partial list of things that could go wrong with a Land Contract. There are also way to ensure that you don't go through these. Contact me and we can discuss this in more detail.