What are the normal terms of a land contract?

Question

My wife and I are thinking of buying a house on contract. I have read a little bit about it but I was wondering what would be a fair down payment and a fair interest rate. I believe we will be ready to refinance within 1 to 2 years.

Answer 1

Don't do it. Rent something you like until you can qualify for a loan, then choose from among the hundreds of houses available in your price range. Don't do the contract for deed for two reasons.

1 You are limiting yourself to houses that the seller is willing to do this (they probably don't have the equity to sell on a new loan, so you'll be overpaying for the house).

2 Lots can go wrong between now and when you intend to get a loan in your name.
- You change jobs. No loan.
- Seller dies. Now you'll be fighting a will or heirs for who gets the house.
- Worse, cannot find seller when you're ready to have them sign it into your name. It does require his signature at that time.
- Seller falls on hard times or is sued and the house's title is clouded. Without clear title, nobody will lend on the house.
- If the seller still has an underlying loan (most do, that's why they're selling this way) it does actually violate the due on sale clause. His bank could foreclose.