A contract for deed may be used instead of a conventional loan if the buyer does not have established credit, bad credit, or needs time to make traditional loan arrangements. The contract is between buyer and seller. The buyer takes possession of the property, but the seller continues to hold the deed. A contract for deed may require a specified down payment, length of contract terms and a balloon amount at the end. The buyer would then receive the deed to the property. This is especially good for a buyer who does not have a strong enough credit rating to get a traditional loan or for some other reason was denied a conventional loan. A bankruptcy in the past could potentially keep a buyer from receiving a mortgage, but a seller could retain the deed until the bankruptcy has dropped off of the buyer’s credit rating.
