A land contract is a written contract between a buyer and seller for the intended purchase of a property. In this situation, the seller still holds the title or deed of the property making them the legal owner, until all payments from the buyer have been made.
A down payment is required. Typically, 10-20% of the contract/sales price is asked for. Equal monthly payments are then made to the seller until the balloon payment is required. A balloon payment is a lump sum of money that is owed to the seller at the end of the agreed upon term. The payment can be made in full by paying cash or by securing a mortgage. Usually, land contracts are held for 3-5 years.
Amoritization Calculator
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If you are having trouble securing a loan through the bank, this might be an option for you. There are a few things to be leery of. Clear title. When you apply for a loan to purchase the property, your lender is going to require that the title be clear of any outstanding liens. If the seller does not pay the property taxes for the duration of the land contract, a lien will be placed against the home. It is advisable to address who is paying the property taxes when the land contract is written up. Mortgage payments. Many times, the property of interest is still mortgaged. In these instances, the seller would apply the monthly payments received from you, the buyer to the mortgage. If the seller does not make the payments the loan will be defaulted on and the property could be foreclosed on.
It is a good idea to get professional assistance before engaging in a land contract.
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