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Contract to Buy - questions


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Ok Charles, Homey, and other eggspurts on here... I know Contract to Buy is not a mortgage, you're basically renting.

What should I look for? pitfalls and gotchas?

I was considering leasing another apartment for another year, then house shopping in winter 2006/2007. However I was thinking over the long weekend about looking for homes that the seller is doing on Contract to Buy, get into that for a year or so, and at the end of the year and the house is in good shape, FICOs in the high 700's and sparkling clean CR's then go thru the mortgage process to get a good rate and pay off the contract. I won't be able to do FHA since I've burnt them in the past (FC about 10 years ago).

How to contract to buy's typically work? is the money paid on the contract going down the drain like rent? Is it more or less a mortgage where the seller holds the note?

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Is this a "lease to own" deal, where in 12 or 24 months, you have the right to pay a price agreed to now, for the home? Is there a deposit involved? If so, they are pretty standard deals. The only pitfall I have seen/experienced is if the person you are paying every month gets into financial trouble, there can be a problem. One person had a "knock at the door" by the sheriff that was foreclosing on the property. The owners were 120+ days late. So maybe seeing the mortgage statement on a regular basis would be nice.

If this is a "land contract", then just make sure that it is recorded as your property. Worth going to a title company/attny for the transaction there.

Charles

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