Land Contract homes - St. Clair Shores Real Estate Talk

Let’s first talk about buying a piece of St. Clair Shores real estate with a land contract. The only way you would want to buy a home land contract is if you cannot get a mortgage. With mortgage rates so low you want to tie up a 15 year or 30 year mortgage with the lowest interest rate possible. There is no reason to do it with a private person when you can get a mortgage. With that being said what if you cannot get a mortgage.

So you have blemished credit and want a home in St. Clair Shores. Maybe you lost your home in foreclosure in the last couple of years. You may have a short time on the job, or be self employed and cannot prove your income. But you want to buy a home now while home prices are down. Now here is what I think of buying a land contract home anywhere in Metro Detroit.

When a seller is listing their St. Clair Shores Lake home and is willing to do a land contract, many times the seller wants more money than market price. There has to be a benefit to the seller to do the land contract. The seller usually wants 5 - 10% interest too. WHY SO MUCH you ask? The seller knows you have bad credit. They know you can’t get a mortgage. So they are going to take as much as they can. The seller is going to either want a higher price for the home than it would appraise for or they are going to want a good interest rate. Yes they are taking advantage of your situation, but you either have to take their deal or not buy a home.

Because you have bad credit the seller is going to charge you more than market rate. So in my opinion buying a land contract home is not the smartest thing to do if you are not going to be able to refinance in 3 to 5 years. However if you are self employed and do not show income then you may never be able to qualify for a loan. So a land contract may be the only option for you.

If the house is way overpriced you do not want to buy it. Why buy a home that it overpriced? You will be upside down right from the beginning. Sometimes when you get a mortgage you do not realize the built in protections of the mortgage process. The bank makes you get an appraisal to protect them from loaning too much money on a home that is not worth it. So sometimes it is smart to put an appraisal clause in a land contract home. If you buy a land contract home you most likely are going to pay too much for the house and pay too much in interest. It is just that simple. It does not matter if it is a Michigan lakefront house or any house. You have to be smart otherwise you may be better off renting.

So the question would be....Will you be gaining anything by overpaying on a St. Clair Shores home now or would it be smarter to wait until you can qualify for a bank loan?