How to structure a seller financed purchase deal

Question

I have the option to buy a house as follows

Sale price $110,000$40,000 Down$70,000 loanThe seller says he is happy to fiance the $70,000 at 7% this is fine by me but what is the best way to structure this deal? or maybe the question is what are the options?The seller has suggested a land contract as he would then have the house as collateral if we defaulted on the payments.

Any help with this would be highly appreciated

Carl Millsap · Answer

@Philip L. You're welcome

Philip L. · Answer

@Carl Millsap yes it is an investment property - thanks for replying its been very helpful

Carl Millsap · Answer

@Philip L. Is this an investment property or primary home? Let's go investment....

The going interest rates for investment property has been 4 -5.5% with 15-20% down depending on the lender and your relationship with them.

If the owner is going to finance at 7% (1.5 - 3%) premium over the market then I'd put less money down, way less.

A land contract (contract for deed) is probably the most common arrangement but I'd have my lawyer draw it up so it protects me and the seller. I wouldn't use a contract the seller draws up unless my lawyer reviewed it. I'd also make sure a title company is used.

So, my ideal situation is $2,500 - $5,000 down at 6% to 6.5%. Again I wouldn't put down $40K with a 7% interest rate. I imagine there are a few lenders who will give you better terms with such a large down payment.