Ljohn55, Other/Just Looking in Clinton Township, MI

is it a good idea to buy land contract if you have low credit score.?

Asked by Ljohn55, Clinton Township, MI Thu Feb 4, 2010

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Buying a home on a land contract is certainly an option for those who may not qualify for traditional mortgage options because of low credit scores. However, you must be aware that Land Contract Sellers "were not born under a rock somewhere". IN otherwords, like a mortgage lender, they too will require a credit report to review as part of their "due diligence" in determining whether they would be interested in entering into an agreement with you. Often, in order to compensate for low Buyer scores, they may require "significant" downpayments, much higher than those that would be required if you were able to obtain an FHA/VA mortgage for instance. Just be aware that while this could be a way to get yourself into a new home, the initial costs may be higher . Good luck in your search for a new home.
0 votes Thank Flag Link Sun Feb 21, 2010
Hi L,

Many people buy with a land contract (the interest rate on the mortgage is higher) because of your low credit. You can use this strategy as a bridge to get into homeownership and use that tax credit if appropriate. Eventually, you will want to improve your credit so that you can obtain financing cheaper elsewhere. See you will pay a premium for a credit rating that is less-than-perfect. i can assist you with repairing and rebuilding your credit rating.

Good Luck!

Hannah Fliegel
The Credit Repair Expert
0 votes Thank Flag Link Sat Feb 13, 2010
You will want to consult with a knowledgable mortgage professional who is well versed in credit restoration prior to signing. Most L.C's are written with baloon terms, meaning after aprox. 3-5 years your owner financed balance will come due. If you are unable to finance the property at tha time you will jeapordize your down payment and any amount you've paid down on the principal. The seller can foreclose on you at that time and take the property back from you. I've seen many "shark" like investors require large down payments and prey on buyers, hoping they will default on the land contract. If you feel comfortable with your ability to obtain financing to pay off the contact in the allotted time and you are comfortable wiht the terms then it might not be a bad idea. Personally, I would rather see you lease with the option to purchase. The reason being, once you have improved your credit score enough to qualify for regular financing you will be able to purchase any home you want...rather than being limited to only homes available for sale on contact. Who knows, maybe in the amount of time it will take you to improve your credit you will find a home you like better. Most homes being sold on land contact are being sold at a premium as well. You might as well have me or someone like me help you get your credit in order, then once you able to finance a home we can find you a good deal on a home, with good terms, at a good interest rate. Just my two cents...

Feel free to call or email me if you would lik eme to review your credit with you and let you know what needs to be done in order for you to finance a home.

TJ Malkasian
P: 616-433-7066
0 votes Thank Flag Link Sat Feb 13, 2010
good morning...land contract sellers may want to check your credit just to see what is on your report......many land contract sellers now are offering land contracts because their mortgage(s) are upside down...if you decide to go land contract, be sure you close with a title company and recv a copy of a title committment without standard exceptions....with std. exceptions is typically all the is usually done for land contracts, but in your case...you will want to know about all mortgages, liens and public records against not only the property, but the sellers as well...i suggest that you ask the title company to give you a title committment prior to giving the sellers any money...lastly.......selling on a land contract for those who have a mortgage violates the "due-on-sale" clause...and at the lender's descretion begin foreclosing...it is usually caught when the new owners go for homeowner's insurance and the lender recvs a copy of the declaration page with new owners listed.....best regards...bob mcclure- first preferred mortgage-southfield
0 votes Thank Flag Link Thu Feb 11, 2010
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