A contract for deed an agreement between two people, a seller, and a buyer. It is most commonly used as a way to transfer ownernship of a home or piece of land over time. What this means is that an individual or a family can achieve home ownership even if they have been denied for a traditional bank loan. A contract for deed is when the seller of a property facilitates the financing of a property with a buyer much like a traditional lender would do.
The buyer and seller of the property come to an agreement on the purchase price of the home, as well as a down payment and interest rate. The seller of the property then acts similar to that of a bank. They create an amortization schedule and collect monthly payments with some of the cash going towards interest while the rest is used to reduce the principal amount. The buyer and the seller also will come to an agreement upon a length of the contract, which will typically be a 20, 25, or 30 year term depending upon the length of the seller’s existing mortgage.
After agreeing to all of the terms, the seller will generally have an attorney draw up the legal documents which will help them be more protected in case something goes wrong during the contract.
Lease Option gives you the “option” to buy the home whereas a Lease-Purchase is a contract to purchase home at an agreed upon later date. One has more flexibility while the other is more concrete.
Here is a legal definition from Rocket Lawyer.
These options and contract for deeds work for different people and come with a lot of pros and cons. We can help you find what work right for your situation based on credit score, down payment, and future plans.