There are many ways that home ownership can be obtained. People can flat out buy homes, paying cash in full. This is probably the very best way to buy a home. No balance is due and ownership is obtained instantly. Most people cannot go out and buy a home. Very few can. Many people get mortgages instead. A mortgage is a way to buy a home in payments, if you will. The home becomes yours via title and you are obligated to pay monthly mortgage payments for the next ten to thirty years, plus interest. Renting to own a home is yet another option, and way to own your own home.
Rent to own agreements come in the form of land contracts. A land contract can be drawn up between the owner of the house and the people who wants to buy it. A land contract is a great option for people who cannot qualify for a mortgage through a bank.
What happens when you find a rent to own home is this. You go and you look at the home. If you love it, and can come up with a down payment then you agree to enter into a land contract with the owner. Papers will need to be signed, and must be notarized. The land contract is a legal document.
Terms will be stated in the land contract regarding repairs that need to be made, the monthly amount, home owners insurance, and taxes. If all of the terms of the contract are met and fulfilled when the last payment is due then at that time the deed of the property will be transferred into the buyers name.
The amount of the land contract purchase will be the cost of the property plus interest. Eight percent interest is standard. A monthly payment will be due on a certain day each and every month for the term of the agreement. There is generally no penalty for an early payment.
When a buyer pays their payments on time or early every month the land contract will actually help to improve the buyers credit. A missed payment could mean trouble though. Land contracts can be broken for missed payments. When your land contract gets broken it is because you have failed to meet all of the requirements stated in the contract. One missed payment can default the agreement making it null and void.
In the case that you break your contract this is what happens. The owner of the home has the right to evict you. They can, and this does not mean that they will, but they can consider all of your past payments as rent for occupying the property and send you on your way. This can happen even if it is the second to last payment. It doesn’t matter. The owner will have the right to do so.
Most people who agree to sell on land contracts are nice people. They won’t screw you over. However, people do need to be aware of the fact that it is very important to make the payments on time, and to meet all of the requirements stated in the contract or it could very well happen.
Is a land contract or rent to own agreement right for you? It may be. Make sure that you seek your attorneys advice if something doesn’t seem right about the contract, before you sign it. A land contract is a binding agreement. If you can make the payments monthly and meet the requirements of the contract you will own the home. Thanks for reading and take care!
