Advantages To Home Buyer In Contract For Deed
#1 – Less Stringent Financing Standards
Credit is not part of the qualification process with contract for deed financing as income and cash down payment are the primary criteria used. For income common sense is practiced as there are no magic formulas like what the banks use to determine loan amounts. This allows many borrowers who were turned down for financing at a bank to qualify with contract for deed financing.
The following are a few examples of the type of borrower that can qualify:
- Self Employed
- Foreign National/not a full U.S citizen yet
- Recent Foreclosure
- Recent Bankruptcy
- Collections, judgments, back child support, tax liens, etc.
- Bad credit, no credit, or “lack of credit”
- Debt-To-Income Ratios are too high
#2 – Gain Equity Appreciation When Home Values Rise
Maybe the most important advantage to borrowers with contract for deed financing is when home values rise you gain all of the equity appreciation. Many potential home buyers who are years away from being able to get a bank loan will miss out on rising home prices, and then eventually be forced to purchase a house at a much higher price then what they could buy it for today.
When home values are rising, buyers risk getting priced out of the market as their ideal home gets more expensive, and eventually the monthly payment becomes too high for them to afford. In real estate we talk about this commonly as home affordability.
“Contract for deed financing allows borrowers to purchase a home and lock in today’s prices”
It is not just rising home prices however, because since you own the house any remodeling projects like a kitchen or bathroom can also increase the value. This makes contract for deed very advantageous for homeowners that don’t mind building a little sweat equity into their home.
#3 – Stop Throwing Money Away On Rent
Contract for deed financing, just like bank financing, will have a set interest rate amortized over a certain number of years (30 years for example) where the borrower is making monthly principal and interest payments. Thus, every month you are paying down the loan amount versus renting where it is just being wasted.
Another benefit? Many landlords raise rent prices every year whereas with contract for deed financing your interest rate is fixed. This means your monthly payment will not change at any time during the loan term.
Many borrowers also enjoy the fact they don’t have to move multiple times, as well as owning the home compared to dealing with property management companies whenever something needs to get fixed with a rental.
#4 – Interest & Property Tax Deduction
Borrowers in a contract for deed can claim interest paid on the loan, along with property taxes, on their personal income tax returns. This is a major benefit of home ownership as it allows many people to realize a larger tax refund every year.
Borrowers should receive a statement from the city annually showing property taxes paid. The seller will provide the amount of interest paid to the borrower for tax purposes.
#5 – A Bridge To Home Ownership
Contract for deed financing can act as a short term bridge for those who face challenges obtaining a bank loan to still achieve home ownership. The borrower can still have all the benefits of owning a home while they work towards a bank refinance, which in the long run will always have the most attractive terms.
"When The Banks Turn You Down We're Here to Help"
-Chris Block Owner & CEO
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Why Contract For Deed?
It is the #1 alternative home financing solution since credit is not a qualifying factor for loan approval.
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Bad or no credit is OK! This contract for deed financing program is strictly income & cash down payment based.
Fast & Easy Application
Get an immediate response on loan approval without all the hoops a bank makes you jump through.
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Don't let that perfect house slip by because the bank turned you down for financing. All of Minnesota qualifies.
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