Land Contract


DEFINITION of 'Land Contract'

An agreement between a buyer and seller of property in which the buyer makes payments toward full ownership (as with a mortgage), but in a land contract, the title or deed is held by the owner until the full payment is made. This type of contract is technically not a legally binding agreement and, therefore, many different types of payment formats can be found.

As in a standard mortgage, there is an agreed upon price and payment schedule, but the payments are often not amortized evenly, so that a large balloon payment may be required to complete the purchase. Also known as an installment purchase contract or an installment sale agreement.

BREAKING DOWN 'Land Contract'

A land contract can be thought of as a "lease with an option to buy". Certain states have more generous legal rights for land contract holders than others. As a result, the world of land contracts can be difficult to navigate. As such, a land contract buyer must be very careful to ensure that the terms of the contract are legally binding in case a dispute arises in the future.

Land contracts are often used by purchasers that would not otherwise qualify for a mortgage, or by investors who wish to complete a purchase faster than a regular mortgage would allow.

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  1. What is an assumable mortgage?

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  2. Can FHA loans be used for investment property?

    Federal Housing Administration (FHA) loans were created to promote homeownership. These loans have lower down payment requirements ... Read Full Answer >>
  3. Do FHA loans have private mortgage insurance (PMI)?

    he When you make a down payment from 3 to 20% of the value of your home and take out a Federal Housing Administration (FHA) ... Read Full Answer >>
  4. How many FHA loans can I have?

    Generally, the Federal Housing Administration (FHA) does not insure more than one mortgage per borrower. This is to prevent ... Read Full Answer >>
  5. Are FHA loans assumable?

    Loans insured by the Federal Housing Administration (FHA) on or after Dec. 15, 1989, are assumable by qualifying borrowers. ... Read Full Answer >>
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