Often, first time home buyers are stymied by policies that lenders have. Using a land contract removes many of the obstacles that banks put in your way. Lenders are justified in having down payment and verifiable income requirements, but just because you don't fit their "profile" of a good home mortgage loan risk doesn't mean you should not/cannot purchase a home.
Steps
- Find a good real estate agent who understands your need to pursue "creative financing" methods. Not only must s/he understand, but s/he must be able to help you in your quest. Buying a home w/o using a bank to finance the purchase is more difficult, but is certainly doable.
- Find a home you like, preferably one that has been on the market for a few months. Don't worry if the listing doesn't indicate that the owner will handle the financing himself.
- Make an offer, close to if not right at full list price. Here is where you tell the seller that your financial future is bright, but that you don't meet the nasty old bank's requirements right now. You can make interest payments and even reduce the principal balance some in the coming 3-5 years, but you just don't have much of a down payment. Yet.
- Have your agent write up an offer, stating that you will make a minimum down payment (all you presently have, but still minimum) directly to the seller, and that you will make regular (monthly?) interest payments (at a substantially higher rate than the seller could get at a bank) on the land contract. You will make periodic principal reduction payments as you are able, and will completely pay off the balance on the land contract in a short period of time: 3-5 years.
- You'll be surprised at a seller's willingness to help. Of course, some sellers truly need to "cash-out" when they sell, and thus will be unable to sell via a land contract.
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