You might hear the term land sales contract used when explaining a property that you essentially rent to own. Also called lease to own, this is an agreement between you and the seller that gives you all the benefits of buying while renting a home. You usually make a down payment upfront, make regular rent payments over the course of several years and make a balloon payment at the end of the lease. The seller agrees to use your rent payments as mortgage payments, and the last balloon payment pays off the house. Look closely to find out when buying a land sales contract is a good idea.
When to Buy a Land Sales Contract
A land sales contract agreement is generally best for those who cannot afford the cost of a down payment. Depending on the price of the property, you might pay $10,000 or more as a down payment. When buying a lease to own property, the down payment may cost as little as the first month's rent, last month's rent and a security deposit equal to the rent. Land sales contracts are also good for those who have poor credit and cannot qualify for a traditional mortgage.
When Not to Lease to Own
Though there are some benefits to land sales contract deals, these real estate deals aren't right for everyone. If you have a good credit score and can qualify for a mortgage loan, you can usually buy a better property. These deals are not good for those who want to feel like they're actually buying either. The seller may put some restrictions on what you can do with the property, including banning you from painting the walls or living in the house with pets, which can make you feel like just another renter.
Before you sign up for a land sales contract deal, make sure that it's the best option for you especially if you cannot get a traditional home loan.
Land Contracts Provide Financing Alternative for Some Homebuyers, ohiobar.org
The Basics of Land Contracts, nolo.com