When you purchase a residence on a contract, you’ve agreed to buy a house by entering a contract with the seller. The buyer and seller need to agree to a selling price as well as other costs.
Is buying a house on a contract in Alabama ideal? Stay tuned to find out.
The Process of Buying a House on a Contract
Individuals who buy a house on a contract usually make an initial down payment to earn the seller’s trust. After the buyer completes their initial payments, the seller will transfer the property title to the buyer. One of the main benefits of buying a house on a contract is that anyone can do it regardless of income. Most people with a negative credit history or who are low-income can’t take out a mortgage, so buying a house on a contract is beneficial.
Continue reading to learn more about this transaction.
Q: How is buying a house on a contract different from buying one with a mortgage?
A: When you buy a house on a contract, you need to stay on top of monthly payments, similar to making mortgage payments or paying rent.
When you rent a house or apartment, your landlord maintains the property by making repairs as needed. On the other hand, when you buy a house on a contract, this responsibility becomes yours.
Furthermore, most contract sales come with a forfeiture clause, meaning you may lose your home if you fail to make payments. If you forfeit your agreement, the seller will get to keep your money; conversely, you can keep your home’s equity after forfeit when you take out a mortgage.
Additionally, if you buy a home on a contract, you’ll need to watch out for “balloon payments.” These payments arise when a buyer makes steady payments, but the remainder of their debt becomes due during the same period. By law, a seller can attempt to collect the full amount in one go, generally resulting in stress.
Q: What should I look out for if I buy a house on a contract?
A: When you buy a house on a contract, make sure the seller files the contract with the county recorder’s office within 90 days after signing the agreement. If you follow this step, you’ll be alerted of any bankruptcy proceedings filed by the seller and other affairs that can impact your home’s interest.
If you forget to make a payment, it’s the seller’s responsibility to give you a notice of the default, which provides you with 30 days to address it. However, if you neglect to take care of the default, your contract might forfeit, and the seller can reclaim the property and keep your payments. Don’t discard any documents and notices the seller gives you when you buy a house on a contract.
Feeling Overwhelmed? Contact Local Home Buyers
If you need a new house, but your credit has declined, buying a home on a contract may be an excellent option, as long as you don’t miss any payments. However, before you can buy a house on a contract, you should sell your current home first. If you live in Huntsville, Alabama, Local Home Buyers can buy your home for a fast, all-cash offer. Please don’t wait and contact us.