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Jennifer Shaw, Other/Just Looking in Grosse Pointe Woods,...

How does buying a home via land contract differ from taking out a morgage?

Asked by Jennifer Shaw, Grosse Pointe Woods, MI Sat Oct 1, 2011

I'm a first-time home buyer and I don't know anything about land contracts.

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A LAND CONTRACT (lousy name for it) indicates that the Owner is financing you instead of a Bank.
You may or amy not be paying the same Interest Rate.
You may or may not have the same terms and jeopardies.

You probably will not have the Credit reported to the Bureaus with a Land Contract.

A Land Contract can be a real CAVIAT EMPTOR for you.

Good luck and may God bless
1 vote Thank Flag Link Sat Oct 1, 2011
Hi Jennifer, if your credit scores are good your better off with a mortgage. Land contract can be risky.
There are first time buyer program available for you to look at online and you will find all the info you need to qualify.

Good Luck
0 votes Thank Flag Link Thu Oct 4, 2012
Taking out a mortgage you deal with the bank or mortgage broker. You need to meet a certain requirements such as credit score, prove of income, job history, 20% down payment..... With Land Contract you deal with investors, they are usually more liberal. Down payments are lower or even nil, everything is negoiatable including term and interest.

For people who can't qualify for conventional loans or mortgages, its a good option, it even helps to repair their credit unless they abuse it.

Dan
0 votes Thank Flag Link Mon Oct 1, 2012
A land contract contains the same components that a mortgage loan does; principal, interest rate, amortization period, term and sometimes a balloon payment. Look at it as the seller using his or her equity in the property to loan you money. There are some things to be aware of so it is best to involve a real estate professional or attorney to make sure that you are not taken advantage of. I would be glad to help you. My number is 586-774-2300.

Best regards,

Tom Lipinski
Web Reference: http://lakestclairlife.com
0 votes Thank Flag Link Tue Sep 25, 2012
Ron's right - buyer so be beware!

Here's the thing about a "land contract" - the seller keeps title to the property.

If the seller has an underlying mortgage, you have to rely on their honesty and integrity of keeping up the payments. If they get foreclosed on, you are going to have to sue your seller in court, and they might not have anything to give you. So you will have essentially been paying rent, rather than buying a home.

Also, almost always - I want to say, every single time, but let's say, "almost always" - the buyer overpays for the property with some combination of a higher sales price and/or higher interest rate.

So, there you go. If the Seller owns the property free and clear, if the price and terms are right, then this could work - but if that's the case, why wouldn't the Seller give you a note and deed of trust, rather than a real estate contract?

I've been in the business for a long time, Jennifer, and I wouldn't do it.

All the best,
0 votes Thank Flag Link Sat Oct 1, 2011
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