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Land Contracts. A Good Deal or a Potential Disaster?
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 ... more

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