Contract for Deed part one: the basics.
In Minnesota, contracts for deed are called contracts for deed, obviously, but elsewhere they might be called land contracts or installment sale contracts.
So, your credit isn't the greatest, and you've heard a contract for deed might be a good idea, but you don't really know what they're about. To illustrate, let’s pretend you will be buying my house on a contract for deed.
Instead of you having a loan with a bank, I will be your banker instead. Why would I do that? First, I want to sell this house that you want to buy. That’s a good thing. The down side is that your credit is bad enough that you can’t get a loan from a bank. So that means if I want to sell you my house, I have to provide the financing for you until you can get a loan from a bank. Usually there will be a balloon payment in two, three, four or five years, although it could be anything. I could even give you a contract that lasts thirty years, just like a regular bank, although I wouldn’t. I need to have you out of my life long before that. Nothing personal, it’s just that I’m not a bank, and I don’t want to be. That’s why there will be a balloon payment when you buy from me.
Next: the balloon payment.