What are land contract homes?

Land contract homes are homes that allow buyers to pay for the home in increments instead of a lump sum through a lender, according to SFGate. When the land contract is signed, the buyer pays a cash down payment and additional payments over time until the home is paid.

The advantage of land contract homes for a buyer is he can buy a home with a low credit score or a low down payment, states SFGate. The buyer can also improve his credit while making payments on his home. Disadvantages of land contract homes include not being able to utilize the tax advantages that come with owning a home and not being eligible for a home equity loan in the same way as a traditional homeowner.