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How Much Does a Land Contract Cost

If you are looking into purchasing a property and don`t have the funds or credit to obtain a traditional mortgage, a land contract may be a viable option. A land contract is a legal agreement between the buyer (or vendee) and seller (or vendor) regarding the purchase of a property. In this article, we`ll explore the costs associated with a land contract.

Down Payment

In a traditional mortgage, a down payment is required to secure the loan. Similarly, a land contract usually requires a down payment. The amount of the down payment can vary, but it typically ranges from 10% to 20% of the purchase price. This down payment is usually negotiable between the buyer and seller.

Monthly Payments

With a land contract, the buyer makes payments directly to the seller, rather than making payments to a bank. The amount of the monthly payments can vary, but they are typically higher than a traditional mortgage payment. This is because the seller is taking on more risk by financing the sale themselves. The buyer and seller can negotiate the payment amounts and interest rate.

Closing Costs

Closing costs are expenses incurred when a property is bought or sold. With a land contract, the buyer is responsible for paying the closing costs. These can include fees for title searches, title insurance, and the preparation of legal documents. The amount of these costs can vary but is typically lower than the closing costs associated with a traditional mortgage.

Property Taxes

Property taxes are an ongoing expense that must be paid by the property owner. With a land contract, the buyer is responsible for paying property taxes. This can be done either directly to the taxing authority or through an escrow account. The amount of property taxes can vary depending on the location and value of the property.


Homeowners insurance is necessary to protect the property and the buyer`s investment in it. With a land contract, the buyer is responsible for obtaining insurance coverage. This can be challenging, as many insurance companies do not offer coverage for land contracts. The buyer should shop around to find a company that is willing to provide coverage.

In Conclusion

When considering a land contract, it is important to understand the costs associated with it. The down payment, monthly payments, closing costs, property taxes, and insurance are all expenses that must be taken into account. While a land contract may be a viable option for some buyers, it is important to thoroughly research and understand the process before entering into an agreement.

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