Land Contract

Using a land contract or assuming the seller's mortgage can indeed be alternatives to obtaining a non-conforming loan, each with its own set of advantages and risks.

Land Contract:

Advantages:

• Helps buyers with poor credit to establish or improve their credit rating over time.
• Typically involves lower closing costs compared to traditional mortgage loans.
• Provides an opportunity to establish a good mortgage payment record, which can contribute to a better credit rating.
• Allows for the possibility of refinancing with a conforming loan in the future.

Risks:

• Land contract purchases may not be recorded in public records, potentially creating issues with establishing ownership rights.
• There's no guarantee that the seller will be able to transfer a clear title to the buyer upon fulfillment of the land contract.
• Lack of lender involvement means there's no assurance that the purchase price is justified, and no property inspection is required, leaving the buyer vulnerable to hidden issues.

Assuming the Seller's Mortgage:

Advantages:

• Can result in savings on closing costs, as there's no need for a new mortgage loan.
• May allow the buyer to inherit a favorable interest rate on the existing mortgage, especially if interest rates have risen since the loan was originated.

Risks:

• The mortgage must be assumable, which is not always the case.
• The buyer assumes responsibility for the remaining balance of the seller's mortgage, which could be higher than the current market value of the property.
• The buyer inherits any existing terms and conditions of the mortgage, which may not be favorable.

In summary, both land contracts and assuming the seller's mortgage offer potential benefits for buyers seeking alternatives to non-conforming loans. However, it's crucial for buyers to carefully evaluate the terms and risks associated with each option and consider seeking legal and financial advice before making a decision.