How to Refinance an Installment Land Contract (bond for deed or contract for deed)

contract-for-deed-300x225Recently I refinanced an installment land contract for a client. There were quite a few lenders that turned the young couple down, just because they didn’t understand what it was and how to refinance an installment land contract (also called contract for deed or bond for deed)

  • If you have had the installment land contract in place for 12 months or longer, it will be considered a refinance and there would be no down-payment.
  • If you’re inside of the 12 months it’s considered a purchase and you would have to make a down payment.

We can refinance an installment land contract (bond for deed or contract for deed) in almost every state.

“When the proceeds of a mortgage loan are used to pay off the outstanding balance on an
installment land contract (also known as contract or bond for deed) that was executed within the
12 months preceding the date of the loan application, Fannie Mae will consider the mortgage
loan to be a purchase money mortgage loan.

The LTV ratio for the mortgage loan must be determined by dividing the new loan amount by the
lesser of the total acquisition cost (defined as the purchase price indicated in the land contract,
plus any costs the purchaser incurs for rehabilitation, renovation, or energy conservation
improvements) or the appraised value of the property at the time the new mortgage loan is
closed. The expenditures included in the total acquisition cost must be fully documented by the
borrower.

When the installment land contract was executed more than 12 months before the date of the
loan application, Fannie Mae will consider the mortgage loan to be a limited cash-out refinance.
In this case, the LTV ratio for the mortgage loan must be determined by dividing the new loan
amount by the appraised value of the property at the time the new mortgage loan is closed.”

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