Home Buying in 56560>Question Details

skittles1011, Home Buyer in Moorhead, MN

I would love to join the world of home ownership. We have been carfully planning and think our best option would be a Contract for Deed.

Asked by skittles1011, Moorhead, MN Sun Mar 10, 2013

Looking for any advise possible to get thru this process. I have done my home work online at different sites and now I think it is time to get a bit more serious. Our lease in our current appt is up May 1st however we may extend one month depending on this process. Any help would be appriciated!! Thanks

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Generally I don't hear "carefully planning" and "contract for deed" in the same sentance these days. For a buyer I tend to think of contract for deed more as a last resort. Very few plans for long term successful home ownership include a contract for deed. If you're considering CFD, you must have cash for a down payment, often more cash than a lender would require. You must have the abilty to make a higher monthly payment than a lender would require because the rate on the CFD is going to be higher. So what would steer you toward a CFD? A low credit score? If you have cash on hand and the ability to make a higher payment, credit can be fixed. A bankruptcy or foreclosure that forces a waiting period before you're eligible for a mortgage? That seems unlikely from the details in your question, but it looks like you've been renting and in this economy some of those waiting periods are surprisingly short.

In MN I suggest you check out http://www.hocmn.org to find a home ownership counselor in your area, and have a detailed discussion of your housing plans with someone who isn't trying to sell you something.
0 votes Thank Flag Link Mon Apr 15, 2013
Just with any other Real Estate transaction I think you will find it extremely helpful if you enlist the help of an agent. Contract for Deeds are everyone's specialty so make sure any agent you work with has experience with that. You may also wish to speak with an attorney who can help add some language to a contract for deed to help benefit and protect you.
0 votes Thank Flag Link Mon Mar 11, 2013
Contract for Deed is a great option for purchasing a home ... if there are no other options. Interview a few Realtors who are experienced in the price range of your new home. Ask for references and check them. Talk to two or three mortgage lenders, again ones experienced in what you are looking for. They will help with an outline of what you must do to own a home.

You would be looking at C4D if you have credit issues and think you can resolve those during the contract period, typically three to five years. This gets you into a house at a predetermined price. The lien holder for the contract probably will not report your payments to a credit bureau so your credit may not be improved.

With rates so low it may be best to see what you have to do to qualify for either FHA or 5% down conventional with prepaid MI. Not only will you save money (3.5% to 5% down vs. 20% down on the C4D), you will probably get a better deal in the house as well (C4D homes are usually higher priced). Good luck with your search!
Web Reference: http://www.mywra.net
0 votes Thank Flag Link Sun Mar 10, 2013
Hello skittles1011,
I'm an agent in the Fargo-Moorhead and surrounding areas. The previous post from the Roseville agent, I believe, is great advice. In a nutshell: Be prepared to offer a large down payment (10% or greater), know that inventory will be limited, and work on traditional financing to be able to take over the loan on your own after the first couple years.
In our market right now there is a significantly smaller number of homes available under contract-for-deed (CFD) because of the risks involved for both parties and the affect CFD can have on the sellers borrowing ability for their next home. But it's not impossible with a little patience.
0 votes Thank Flag Link Sun Mar 10, 2013
A quick rundown:

1) Most contract for deeds start at around 10% for down payment, and some may even want 20%. Keep saving like crazy and you won't miss a property because of this.

2) There will be limited inventory compared to traditional real estate. Start looking immediately and you should be fine with May/June

Seller financing is a great path to home ownership when no other options are available on the table. Both contract for deed and lease options have their pros & cons. The important thing for every buyer in this situation would be coming up with a game-plan for traditional financing.

If you can't get traditional financing now then figure out why. From there figure out your timeline it would take to qualify traditionally. Work towards that goal always, because a contract for deed is not meant to be long term financing in most situations.
0 votes Thank Flag Link Sun Mar 10, 2013
The seller CAN report your payment history to the credit companies, but these are regular people and that usually does not happen. You can try to do it manually if you keep careful payment receipts, which you would do for the MID anyways.
Flag Sun Mar 10, 2013
as far as equity goes you agree to the purchase price upfront (it is just like buying a house). The thought process is in a appreciating market your home will be worth more 5 years down the road than it is today. This makes refinancing easier, and it also offsets the higher interest rate you will pay versus traditional financing
Flag Sun Mar 10, 2013
I honestly have never heard of a "cloud on title". You will take title to the property and the seller retains the deed. When you execute the loan (usually there is a balloon payment and you just refinance to traditional financing) the seller hands you the deed. This is different than traditional financing where you are on title and deed, but the lender puts a lien on the house in the form of a mortgage.
Flag Sun Mar 10, 2013
Thank you!
We have been working on fixing our credit. slowly but surely. I have read in a C4D that there is a cloud on the title which may be useful for the buyer as far as equity. Is this true and wouldn't that typicly help a credit rating?
Flag Sun Mar 10, 2013
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