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Land Contact

REFINANCE A LAND CONTACT WITH AN FHA MORTGAGE LENDER

WHAT IS A LAND CONTACT? A land contract, contract for deed, agreement for deed, installment contact or installment sale agreement is a contract between the buyer and seller of real property in where the seller provides the buyer with owner financing in the purchase a home, and the buyer repays the seller in monthly payment. With a land contract, the seller retains the legal title to the property, while permitting the buyer to take possession of the home for legal purposes. The sale price is typically paid in periodic installments, often with a balloon payment at the end to make the time                                                                                                                                            

WHATS THE MAX FHA MORTGAGE AMOUNT WHEN REFINANCING A LAND CONTACT? Homes acquired through an unrecorded land contact must be treated as a regular purchase.  When the purpose of the new FHA mortgage is to pay off an outstanding recorded land contract, the transaction is treated as an FHA Rate and Term Refinance.  As long as the land contact is recorded in public records the unpaid principal balance shall be deemed to be the outstanding balance on the recorded land contract.

FHA RATE AND TERM REFINANCE OUT OF A LAND CONTACT- Homeowners that under a land contact can FHA refinance up to 97.75 % in order to transfer title into their name using the FHA mortgage. FHA mortgage applicants must provide timely payment history by either 12 months canceled checks or wire bank transfer in order to document timely payment history from a private lender. When the full purchase price has been paid including any interest, the seller is obligated to convey (to the buyer) legal title to the property. An initial down payment from the buyer to the seller is usually also required by a land contract.                                                                                  

LAND CONTACT LAWS VARY BY STATE-Since a land contract specifies the sale of a specific item of real estate between a seller and buyer, a land contract can be considered a special type of real estate contract. In the usual, more conventional real estate contracts, a seller does not provide a loan to the buyer; the contract either does not specify a loan or includes provisions for a loan from a different “third party” lender, usually a financial institution in practice. When third party lenders are involved, typically a lien, as part of a mortgage or trust deed, is placed on the property, in which the value of the property serves as collateral until the loan is paid in full.

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