Final answer:
A land installment contract is advantageous to the buyer because it provides an alternative way to obtain financing, which can be valuable when traditional financing is hard to come by. The contract involves installment payments directly to the seller, typically including interest, until the full purchase price is reached. The correct option is
B. It is an alternative way for the buyer to obtain financing.
Step-by-step explanation:
A land installment contract is advantageous to the buyer primarily because it offers an alternative way for the buyer to obtain financing, especially in situations where traditional financing may be difficult to secure. This can be particularly useful for buyers who may have less-than-ideal credit or who are self-employed and may not have the typical proof of income required by traditional lenders. By engaging in a land installment contract, a buyer agrees to pay the seller in installments, often including interest, until the full purchase price is paid, at which point the title is transferred to the buyer.
However, contrary to option A, land installment contracts typically do include interest payments. Regarding option C, acquiring encumbered property is not a specific advantage of land installment contracts, and option D is incorrect as this method has no direct connection to obtaining mortgage insurance. The process of escrow can be involved in the purchase of a home through different financing methods but is separate from the concept of land installment contracts.
Securitization benefits local homebuyers in that it allows local banks to lend without needing significant extra funds on hand since they plan to sell the loan off rather than keep it on their books long-term. This increased liquidity in the banking sector can facilitate more flexible financing options like land installment contracts.
The correct option is
B. It is an alternative way for the buyer to obtain financing.