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Understanding Your Options
Remember: Both have pros and cons, so research and consult a professional. Always read and understand the terms before signing any contract.
Visit Minnesota Housing's Homeownership page for resources, including help to cover costs for down payments and closing costs.
Mortgage
- You borrow money from a lender to buy a home.
- Typically requires a down payment.
- You make monthly payments with interest.
- You own the home from day one.
- You can build equity and get tax benefits.
- You have foreclosure rights if you are late or miss a payment.
Contract for Deed
- You agree to buy the home from the seller over time.
- You make regular payments to the seller.
- You don’t own the home until the contract is complete. This often requires a large lump sum, or ‘balloon’ payment.
- If you fail to make any of the payments, the seller can cancel the contract and evict you quickly.
- Generally higher interest rates.
- Limited tax benefits, and you may not be able to access equity.
Which Is Right for You?
- Choose a mortgage if you want ownership and tax benefits.
- Read the terms carefully. Always read and understand the terms before signing any contract.
- Get help if needed.