When you buy a house on a contract, it means you’ve agreed to buy a property by entering a contract with the seller. The buyer and seller must both agree to a selling price as well as other conditions.
Should you buy a house on a contract? Continue reading to find out.
Is Buying a House on a Contract Superior?
People who buy a house on a contract typically make an initial down payment to earn the seller’s trust. Once the buyer makes all initial payments, the seller will then transfer the property title to the buyer. The primary benefit of buying a home on a contract is that anyone, regardless of income, can do it. Many people with a negative credit history or who are low-income don’t qualify for a mortgage, so buying a house on a contract is their best option.
Here are some frequently asked questions regarding this type of transaction.
Frequently Asked Questions
Q: How does buying a home on a contract differ from buying one with a mortgage or renting?
A: When you purchase a house on a contract, you’re responsible for making monthly payments, which is similar to making mortgage payments or paying rent. When you rent a house or apartment, your landlord is responsible for maintaining the property by making repairs as needed. However, when you buy a house on a contract, this responsibility is solely yours.
Moreover, most contract sales come with a forfeiture clause, meaning you can lose your home if you stop making payments or breach your contract. If you forfeit your contract, the seller will get to keep your payments and home improvements; this differs from a mortgage loan because when you’re on a mortgage, you can keep your home’s equity after forfeiture.
If you buy a home on a contract, you’ll also have to look out for “balloon payments.” This type of payment occurs when a buyer makes consistent payments, but the rest of their debt becomes due during the same month. A seller can legally attempt to collect the full payment at once, usually resulting in frustration.
Q: What are my rights if I buy a home on a contract?
A: Once you buy a house on a contract, you should make sure the seller files the contract with the county recorder’s office within three months after signing the document. If you take this step, you’ll be notified of any bankruptcy proceedings filed by the seller, as well as other actions that may impact your property’s interest.
If you miss a payment, it’s the seller’s responsibility to serve you with a notice of the default, which gives you a month to take care of it. If you fail to take care of the default, your contract will forfeit, and the seller can legally reclaim your home and keep your payments. It’s essential to keep all notices and documents the seller gives you when you purchase a property on a contract.
Don’t Stress and Contact Texas Sell Now
If you want to buy a new home, but your credit is in the negatives, buying a house on a contract may be ideal for you, provided you stay on track with your payments. Before you can buy a property on a contract, however, you should sell your current house first. Let Texas Sell Now buy your home for a speedy, all-cash offer. Skip the hassle and contact us today.