Unconventional lending practices on the rise

The number of banks willing to give out loans to consumers has decreased significantly over the past few years, causing many people to find creative ways to purchase homes, according to Bloomberg. One of these methods is for homeowners to provide financing to their buyers themselves.

"Anytime the market is in this much trouble, people have to find ways to get it to function," Dennis Capozza, a professor of finance at the University of Michigan in Ann Arbor, told the news source.

Purchasing a home through a land contract allows the buyer to immediately move into the home, but enables the seller to keep the title until the entire debt is paid, according to the news source. These contracts were used for 319 sales in Michigan in the first quarter of 2011.  

This type of sale allows people that have low credit scores or limited funds for a down payment to purchase a home because the buyer doesn't need to qualify for a bank loan.

There are risks associated with land contracts for the seller and the purchaser, but in hard economic times Bloomberg says some people turn to unconventional methods.  

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