Seller as Private Lender

[Mark Saxon]

My credit repair guy just told me that the owner of the property I want is willing to consider selling on a land contract. My credit is 580 based on Equifax's FACO, and the seller has been lenient so far in waiting for us to get credit situated, but it's been longer than expected and we really want this house because of it's location, a unusually large lot size for the area, and that it allows us to have a first primary home with good starting equity.

As first time homebuyers, I was told so long as the land contract was written properly, we wouldn't lose first time homebuyer status when we refinanced the land contract. But I'm qualified for a 5k down payment/closing cost assistance grant good for any lender, so here's what I'm thinking of....

Seller goes on paper as holding a 30 year conventional mortgage, handled by a loan servicing company to allow it to be recorded as mortgage and report on credit as such.

$1700 our cash plus $5k grant means $6700 for minimum closing requirements, and seller would get remaining as a down payment. Mortgage to be paid off should come out between 20 - 25k, which means even at 10% interest will have minimum payments for mortgage and property taxes at less than $600.

This would benefit the seller in giving her a larger down payment than we'd be able to give doing a standard lease to own/contract for deed. It would relieve her of the property holding costs on a property that has been hard to sell due to being outdated and foundation needing cosmetic repairs.

It would help us by allowing us to secure the property, give us the use of first time buyer benefits, improve our credit without going through the hoops of a conventional lending process, and we'd be able to pay less on the mortgage than we would on rent.

Any thoughts? I need to call my credit guy today and wanted to run this scenario here first to get the thoughts and suggestions of those more experienced than I.