What's the difference?

[DUMBAGAIN]

What is the difference between a land contract and a lease option? Is one safer to enter into than another? Does the land contract eventually have to financed by a mortage like a lease option?

Any insight would be great! Thanks Dumb.

[keepinitreal]

A land contract is when you buy a house directly from the seller. The house seller holds your note and you make your mortgage payments to him/her. You can deduct your interest paid on your income tax return.

In a lease-option, you pay the property owner a monthly rent payment and a portion of it builds up to an eventual down payment. When your lease is up, you can walk away and lose the option money you built up, or buy the house using your built-up down payment.

[AngelinaCatHub]

Also you are dealing with Contract for Deed. That is a land contract. and as 'keepinitreal' said, in a contract for deed, you actually have full ownership rights and responsibilities including paying of taxes on your name. You insure it as yours and when you fulfill the contract, you get a Deed. I've purchased this before and it is an easy way with no credit checks or needs of the seller to do all the inspections and hoops as in a sale.

The good part about it is this, if you cannot pay, you can freely walk away without penalty, and the property simply reverts to the holding owner and you forfeit your payments. That is all. Any improvement you made must stay so it is a no lose situation both ways. 'Hub

[DUMBAGAIN]

How easy/hard is it to find homes for sale under land contract? Also, do you pay the bank directly monthly or do you pay the seller and they pay the bank?I would be nervous about them not making the payments. Or are these homes normally already paid for and the payment don't have to go to a bank only the seller?

[HHM]

You will need to refer to your state's laws about land contracts. In general, they are one of the most risky ways of trying to acquire property. You will want all terms in writing and most importantly recorded with the county recorder's office. If the seller is unwilling to record the documents, then that means his mortgage does not allow the land contract. However, there is nothing inherently wrong with doing land contracts, but it can be hard to find a seller willing to do one.

Lease options should also be recorded.

Both run the risk of the seller not making the underlying mortgage payments.