Tips For Buying a Minnesota Contract For Deed Home

This is the second post in my Minnesota Contract for Deed Home Buying and Selling series.  Check out the first post: How to find a Minnesota Contract for Deed Home!

Today I we will talk about the basics that the home buyer should expect when trying to purchase a contract for deed home in Minnesota.

1. How much down payment is needed?  Typically a seller will want AT LEAST 10% down on a contract for deed house in Minnesota.  Often sellers want 20% down or more.

In my opinion 10% is a fair amount, but I can see why sellers want 20% down.  If you want more then that down as a seller its not very likely that you will find a buyer.

If your a buyer thinking that $1000 down or $5000 is enough, then your not a buyer.  Your a renter and will need to find a rental 99.9% of the time. We can perhaps find a rent to own for you.

2. What is the interest rate?  Both interest rate and down payment are normally negotiable, but it does come down again to what the seller is willing to take. Currently I am seeing interest rates between 5% and 8%.  More often I see a 6%-7% rate.

If your a buyer and you are finding supply on contract for deed homes in Minnesota are limited. Don’t get upset at the interest rates on the higher side. Keep in mind most sellers won’t consider a contract for deed.  Keep in mind if your getting a loan at the bank most buyers have mortgage insurance and that is now really expensive.  You don’t have that on a contract for deed.The higher rates really don’t make that payment that much higher then if you were to go get a loan.  Plus, you probably are not able to get a loan so you have to factor in what the contract for deed payment is compared to renting a similar house and its likely LESS then rent.

3. What are other terms to know about?  Often a seller will want a balloon payment.  A balloon payment is where the loan payoff is due at the balloon date.  This should be a date where as a buyer you feel strongly that you can get your own mortgage and finance out the contract for deed.

The most common balloon periods I see are 3 to 5 years.  That is because if your coming out of a foreclosure it typically takes 3-5 years to get your own financing.  Again a seller may want something different and you may have to negotiate that.

If you have other questions on Minnesota contract for deed homes or want me to find you a home available on contract for deed in Minnesota, please fill out the contact box below or call Chuck Carstensen with REMAX Results!
Call (612) 290-3809

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