What is the Interest Rate on a Land Contract in Wisconsin (WI)?

The interest rate on a land contract or contract for deed in Wisconsin can vary. A good rule of thumb is it depends on the amount of down payment and risk for the seller.

Most interest rates on land contracts or contract for deeds in WI currently range from a fixed 6.8% - 12% on a standard 30 year amortization.

Sellers that do a fair amount of owner financing tend to like to make it more of a standardized process. These sellers of owner financed homes typically will take the current going 30 year fixed rate and put a spread on it. This spread is a direct relation of risk.

For instance, for simplicity take a $100,000 home in Wisconsin. The seller is willing to accept anywhere from 5 - 10% up front as a down payment. The seller might even show you an example stating that if you put down 10% your rate will be:

Current 30 Year Fixed Rate + Spread = Total Interest Rate on Land Contract


So for a 10% down payment we take a current prime 30 year fixed rate of 4.5% and since this is an owner financed home the spread will be 3 points (3%). So the interest rate you would have on this land contract if you put 10% down is a fixed rate of 7.5%.

Next the owner tells you, that you can put only 5% down but the spread will be 4.5%, for a total rate of 9%. So here you are putting 5% down, and paying a total fixed rate of 9%.

Why does a seller do this? First and foremost is the risk, the less down payment the seller receives the more risk the seller has if anything in this deal goes bad. Although your down payment isn't the only factor, there can be such things as your current financial situation, term of the contract, or lump sum payments that you can negotiate in.

Most land contracts or contract for deeds that I see in Wisconsin have an interest rate that ranges from 8.2% - 12.0%. Can you get a better deal, sure, but it will take some negotiation and having a good understanding of the ins and outs of owner financing.

Learn the Secrets to Buying Owner Financed Homes

Land Contract for Deed and Owner Financing in Wisconsin

Are you looking for land contract for deed or owner financing homes, houses, townhomes, condos in Wisconsin?

We are getting closer to a full launch of our site here at WIOwnerFinancing.com. Expect to have quite a few property options located primaraily mid and southern Wisconsin. We are working on other more rural areas but those will come sometime mid 2008.

Another form of owner financed real estate is a seller carry back. A seller carryback is where the seller carries a second mortgage or even a third mortgage on the home. This type of transaction requires you to have better credit than the other common forms of owner financing such as rent to own or the previous mentioned contract for deed.

Land Contracts, Rent to Own, Seller Carry Backs are all forms of Owner Financing and given the current market conditions might just be the way to buy a home here in the next few years.

Secrets of Owner Financing Homes in Wisconsin

Are you looking for owner financing homes, houses, townhomes, or condos in WI?

In this post I will go over some information on the different types of owner financing real estate and give you the some basic tips and requirements for each.

There are many forms of owner financing each with its own special considerations and benefits. Which form of financing by seller is right for you? This depends on a few factors some of which you control some of which you might not.

What are the major forms of owner financing?
Land Contract for Deed – Typically the most preferred of owner financing. For more information on how a contract for deed works visit our section.

Owner Seller Carry Back – This requires you to get your own financing in the first position and gives you more benefits than a contract for deed. How does a seller carry-back work, visit here.

Rent to Own – Rent to Own or Lease Option is a form of owner financing where you rent for a period of time and during this time you have the option to purchase the property. For more information on how rent to own works visit this section of our site.

Those three cover the most likely forms of owner financing you will encounter if you are looking for a new home from a seller that offers owner financing. So what exactly would a property owner, real estate agent, realtor, or management company expect from you to get approved?

One thing to keep in mind with any form of owner financing is the owner of the home is essentially acting as your bank. Just as you would have to prove to a bank your ability to afford your new home, there are certain things an owner offering financing will look for.

Up Front Payment Amount
It will be very rare for you to be able to find an owner financed home that will require no upfront payment. This upfront payment from the sellers prospective shows you are serious about not only making future payments on time but serious about making this your home.

For a Land Contract for Deed down payment required is usually 5 – 15% of the purchase price.

For a Rent to Own or Lease Option you won’t be providing a down payment but an option payment that secures your option to purchase the property. This is typically in the range of 2 - 4% of the option price.

Seller Carry Back, in this current market with decent credit you should be able to find financing at 80% first mortgage, with 10% down payment and the seller carrying back a second mortgage for 10%. Remember this 10% carry back will be factored into your overall payment criteria.

Monthly Payment Amount
Land Contract for Deed, Monthly payments for a CD will typically be based on an agreed upon interest rate at 30 year principle and interest payment on the balance of the contract after your down payment. For instance, for a house with a purchase price of $100,000, with a $10,000 down payment, and a $10,000 carry back, your payment will be base upon the agreed upon interest rate on $80,000.

Rent to Own, typically monthly payments on a rent to buy will be closer to what market rent. Remember though typically market rent is a little bit lower than what it would actually cost to own the home.

Seller Carry Back, the monthly payment for the carry back will depend on the amount of the carry back. For instance, expect that a seller who carries back 10% to expect a higher rate than a seller that keeps a 5% second mortgage on the property.

Term
Land Contract for Deed, terms for a CD differ and can last as long as 30 years exactly like a typical thirty year mortgage. Although this depends on the down payment so you can expect terms in the range of 3 – 7 years to be common for most contracts.

Rent to Own, the length of a rent to own typically is 12 – 36 months. Very rarely will you see a rent to own exceed 3 years, although this is not unheard of. It is likely though that it is a much better deal for you to exercise your option sooner than later.

Seller Carry-Back, the term of a typical carry back will depend on the amount of carry back and what you and the seller negotiate. Most carry backs will be at least two years and require a lump sum payoff.

This is just an overview of the basic terms and payments of seller financing real estate, I will in future posts give more detail about the basics and how to find Land Contract for Deed homes in Wisconsin, Rent to Own homes in Wisconsin, and Seller Carry Back deals in Wisconsin

What is a Land Contract in Wisconsin

What is a Land Contract in WI? A Land Contract in Wisconsin also known as "Contract for Deed" or "Seller Financing" is a loan from the seller for real estate/property instead of getting a conventional loan from the bank or having a mortgage through a financial institution.

The seller holds the title or deed and gives buyer equitable title until the contract is fully satisfied by the buyer. Then buyer will get full ownership to the property. Just like a bank loan, a land contract normally has a down payment, interest rate (commonly higher than banks interest rates), over all length of contract. The loan can be fully satisfied at the end of the contract or a lump sum is due called a balloon payment.

Buyers sometime get bank financing to pay off the balloon payment to the seller. A land contract is not just for vacant land, but can be used when buying a home, condominium, commercial property, farm land etc...

If you are looking for a land contract or contract for deed in Wisconsin please visit our website often.

Can I do a rent to own after foreclosure in Wisconsin?

A question I hear often here at WI Owner Financing is:

Can I do a rent to own after a foreclosure?

Yes you absolutely can and you should. A rent to own is actually a perfect solution to get back on your feet and on the road to home ownership. Why go back to the straight renting world for a few years when you can do a rent to own immediately and get the benefits of monthly rent credits and locking in the purchase price on a your new home.

While it is good to do a rent to own with a foreclosure on your credit file there are a couple of things you should keep in mind.

The main item of concern is the end financing solution. As with any rent to own your main end goal is to obtain your own financing. In all my conversations with Lenders and mortgage brokers it is apparent that with a foreclosure on your credit record most lenders want to see at least 18 - 24 months from the foreclosure date (sheriff sale) before they will offer home financing.

The next item should go with out being said but is one of the keys for obtaining financing after a foreclosure. You must pay your bills on time. Lenders want to see that you have been responsible and have been able to pay your bills with little problems.

The final item is that it is critical that you take an active roll in your own credit repair/maintenance or enroll into a credit repair/maintenance program. If you do credit repair/maintenance yourself make sure you stay on top of this diligently. Your other option is to work with a reputable credit maintenance agency such as http://www.creditrestorationltd.com/. This last item is critical to making a rent to own a success.

With all the problems with exotic mortgages such as adjustable rate mortgages (ARMS) we might possibly see lenders in the future relax the 18-24 month time frame a little but it will still come down to your income and credit behaviour since the foreclosure.

In closing, finding a home on rent to own is one of the best first steps to getting back on track with home ownership after a foreclosure.

Rent to Own and Wisconsin

Is now a good time to do a Rent to Own in Wisconsin?
Now might be the perfect time to do a rent to own in WI. Most rent to own terms are 12 - 24 months. Given the current real estate market conditions, financial lending guidelines, and time of the year, now is the perfect time to do rent to own a home in Wisconsin. Given this time frame most things should have worked themselves out well before it is time for you to get your own financing.

The real estate market is having a tough time now, houses are not selling as fast as they used to, but houses are still selling. There are some things to keep in mind when considering a rent to own in this marketplace :


Is the purchase price fair and fixed for the length of your lease to own term?
What are other houses selling for in the neighborhood?
How much rent credits are you getting?
What is your current credit situation and how long before you can get financing?
Are you in a credit maintenance or credit repair program?

These are just some questions you should keep in mind when considering buying your next home on a rent to own in WI. Remember if any questions about a lease option in WI make sure you ask the real estate agent, owner, landlord, or property management company you are working with.