Buying a home WITHOUT a mortgage can be an exciting adventure! Our 5 Step Contract for Deed program can help ensure the process is as smooth as possible, while avoiding the risks and stress of this forgotten tool. We’ll help keep the process as transparent as possible while we will help you understand the process – from steps you should take at the beginning through closing on your new home. While there are a lot of details involved, taking the right steps and making informed decisions will make your new home purchase go as smoothly as possible.
Before we start….
It will help you tremendously to define your goals! Set financial goals of maximum down payment and monthly payment that fit your budgets. Clarify your monthly and annual income amounts, know your monthly debt obligations, check your credit score and confirm your bank and retirement assets. Then define your desired home goals – area, type of home, must-have amenities, etc. Plan to be flexible on some of these requirements, but starting with a best-case list will be helpful.
STEP 1 – Pre-Qualification and Pre-Approval
Successful contract for deed buyers must have:
- A minimum of 10% down payment (or $30,000, whichever is more)
- Reasonable monthly debts compared to monthly income, including the new house payment
- A plan to pay off the contract within five years (usually by refinancing into a mortgage)
If these We can then discuss specific details to ensure our program is a good fit for you financially. It is always recommended buyers first discuss mortgage options with a mortgage consultant to help determine steps and timing to qualify for a mortgage. The responses to these 5 questions may help clarify if A Good Deed Contract for Deed is right for you.
Assuming pre-qualification should be acceptable, getting pre-approved involves PROVING your income, assets, debts, etc. Gather documentation regarding down payment, assets, income, credit and employment and submit for review. Hint – once the application (step 1) is started, documents can be uploaded. The review is usually done within 24 hours!
Start the Pre-Approval process HERE
STEP 2 – Finding A Home ~ The most exciting part of the process.
A Good Deed works with your Realtor to help you identify homes that meet your financial and family needs that also fit our property requirements. Keep in mind there are more buyers than sellers, so not everyone is able to purchase a home even though they are approved to.
Search for homes HERE
STEP 3 – Making A Offer ~ the most frustrating part of the process
Once you’ve found the home you’d like to buy, it’s time to make an offer. Here’s where a good Realtor earns their money – showing you the home is the easy part. Shepherding you through offer, inspection and closing is where great Realtors shine! Your Realtor will discuss various inspections on the home and property. As in any home purchase, the buyer will coordinate any desired inspections with their Realtor and inspectors at their own expense. A Good Deed does not require inspections unless there are obvious issues with the home.
Sellers can counter your offer, inspections can reveal possible repairs, and you can suddenly find your budget at risk and maybe even question if this is the right home for you. Above all, stay calm and continue to communicate with everyone involved. Check your budget, your emotions, and your Realtor to make the next right steps. hint: focus on a comfortable house payment, NOT the home price. Market conditions will dictate home prices….which are important if you are going to sell the home soon (known as FLIPPING).
Step 4 – Deciding to move forward
‘A Good Deed’ contract for deed involves TWO transactions, so there are some differences on moving forward. By the end of your inspection period, you’ll provide your earnest funds to our trust account (earnest funds = down payment). This is unusual compared to a mortgage or cash transaction where buyers bring down payment to closing, but necessary due to the multiple parties, transactions and commitments in the process. An exception to the down payment is if the new home is contingent on the sale of your current home (or another event).
Built into the purchase agreements and terms of A Good Deed contract for deed are the costs for an appraisal and title insurance. In some competitive transactions, an appraisal valuation can be waived, but we will discuss before such an offer. We both prefer the price to be in line with the value of the home if possible. The title company used by A Good Deed to acquire the home will also be used to sell the home to you.
As in a traditional home purchase, the buyer chooses their own homeowners insurance company. A local agent is preferred (vs. a national call center) since there may be adjustments prior to closing. We also have a few referrals of competitive insurance providers we have seen clients use over the years.
The timing for closing can vary, but the average is 30 days. Typically, within 48 hours prior to closing, you’ll do a final walk-through to check that all agreed-to repairs are completed and that the home is in the expected condition.
At closing, you will have some expenses to pay, including:
- Realty admin fee (your Realtor’s brokerage fee)
- Annual homeowners insurance premium
- Daily property taxes and interest from the date of closing through the end of the month
- Any association dues and expenses, if applicable
STEP 5 – Paying off your contract for deed!
Congratulations, YOU are in control! Don’t forget that you do need to make your contract payments and adhere to the other terms of your contract. For the next few months or years, you’ll work towards adjusting your credit and finances and hopefully qualify for a mortgage soon. Refinancing your contract for deed into a mortgage is the ultimate goal…and your mortgage consultant, Realtor and advisors will help guide you so you will one day have the deed and OWN the home.
