Home Buying in 48101>Question Details

Andrea Stewa…, Home Buyer in Hamtramck, MI

How does land contract work?

Asked by Andrea Stewart, Hamtramck, MI Tue Jun 12, 2012

I want to know how does buying a house land contract work? Do you need a big down payment or is a steady income enough? Do you have to have good credit or a written notice from your current land lords?

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To answer your questions; First of all a Land Contract is an agreement between a buyer and a seller. The Seller of the property provides the financing on the property, not a bank or a credit union. Both parties agree on a sales price, an interest rate and a payment.

With a Land Contract the Seller retains the Title to the property, while the buyer usually takes possession of the property. All aspects of the Land Contract are negotiable, interest rate, down payment, installment payments, length of the loan, and ballon payment, to name a few.

Generally in a Land Contract, expect to pay a higher interest rate and a decent sized down payment, depending on the cost of the property. Does your credit score have to be decent? Generally the answer is no. Sellers offer Land Contracts because a lot of buyers do not qualify for conventional financing. So Land Contracts offer buyers an alternative to buying a house, especially when a Bank or Credit Union can't qualify you for a mortgage.

What does a seller get? He gets to sell his property, usually at a higher price (because of the risk), collect a higher interest rate than a bank would, collect monthly payments, sells property at a guaranteed price in the future and can take the property back in case of default, just like a bank.

A steady income of course is necessary, but not a great credit score. All aspects of a Land Contract are negotiable. I would advise you to use a Realtor to help you negotiate the contract, the Owner (Landlord) may not have your best interest at heart if you negotiate directly with them.

Contact me if you need more information, but that is the basic summary of a Land Contract.

My contact information is below,

Thank you,

Elias Realty
(248) 379-6547
0 votes Thank Flag Link Tue Jun 12, 2012
I'm looking to purchase a home on a land contract in the Kenosha,Wisconsin area.
Flag Mon Jun 8, 2015
@jarandolph - who is responsible for the taxes/insurance is usually worked out in the land contract agreement. A lot of sellers want to know that the taxes are going to be paid so they collect it in the monthly payment.

As to repairs...usually the buyer is responsible for that just like they would be if they had bought the home outright and gotten a traditional mortgage. If a house has a leaky roof, the owner doesn't call the mortgage company and ask them to fix it do they? In a land contract, the seller IS the mortgage company - so they are not expected to make repairs.

Another form of owner-financing that is similar to land contract is Lease-Option or Rent-to-Own. In this method, the two parties spell out in the paperwork who is responsible for repairs...just like they spell out who is responsible t pay the taxes/insurance.
Flag Thu Nov 14, 2013
Who pays taxes and repairs on property?
Flag Sat Sep 28, 2013
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