Owner Financing: Making home ownership a
reality!
owner financing home
In todays housing market, it is a great time for a buyer to purchase a home for sale at a great price. If you are able to buy a home but dont qualify for a traditional mortgage, there is an abundance of opportunities in creative financing. With the recent catastrophe in sub-prime mortgage lending, the collapse in banking and insurance, and a plummeting stock market more and more buyers who are saying we can buy with owner financing, are being considered.
Owner Financing What is it?
Owner Financing or Seller Financing is a case where the buyer obtains a partial or full loan from the seller instead of a traditional lender or bank. Seller financing is simple enough to understand and comes with many benefits. The seller takes on the responsibility of a lender and the buyer makes direct payments to the seller over the loan period. This option may be used if the buyer for some reason may not qualify for a traditional mortgage.
Owner Financing- How does it Work?
This is a general outline of how owner financing functions. The seller accepts a down payment and provides a loan to the buyer directly. The details of this loan are included in a legal contract called a promissory note which promises the seller monthly payments for a fixed period of time. With the promissory note in hand the buyer is now in possession of the property; there are no lenders or banks involved.
In this situation, the buyer is the 100% owner of the property contrary to a lease option or rent to own where the deed (shows ownership) does not transfer to the buyer until a later date.
Owner Financing- Why is it becoming so Popular?
Owner financing has become popular due to a recent tightening of credit markets. It has become difficult for buyers with both good and bad credit to get a traditional bank loan. This kind of financing may ensure a quicker and easier road to home ownership.
Owner Financing Why is this sometimes the best Option?
Easy Qualification is the main reason. The buyer, in many cases, prefers owner financing to conventional financing because it does not require traditional bank income and credit approval. The buyer may have poor credit because of a divorce or recent bankruptcy. He may be self-employed and cannot prove income. He may be new to his job and cannot meet strict lender guidelines.
Even if he could qualify for a loan, the rate will be astronomical if he has poor credit. Furthermore, few conventional lenders offer fixed interest rate loans to people with a poor credit rating.
As you can see, there are dozens of reasons why a buyer cannot (or will not) qualify for a conventional bank loan. Owner financing becomes a perfect solution for this individual or family!
Owner financing Benefits for both Buyer and Seller:
- The period until closing may be much faster allowing someone to move in quickly.
- Closing may also be easier since one does not have to wait for the mortgage to be approved by a lender.
- Paperwork is comparatively less extensive.
- Buyer and Seller can work out the terms of the agreement together a certain degree of flexibility involved.
- Buyer may be able to receive benefits of owning a home such as tax deductions and down payment of equity.
Rent to own TX vs. Owner Finance TX Whats the difference?
Many people confuse rent to own Texas with Owner Finance TX. You will also see advertisements for lease to own TX, Lease option TX, and lease purchase TX. Basically, these terms all mean the same thing- you are leasing and do not get the deed until after a predetermined time period and certain financial requirements have been met. In theory, this sounds great. You have a deal made with the seller, you have a set time to come up with additional funds Heres the challenge: We see situations over and over where the seller decides that original agreement is not so favorable down the line. Maybe theyve found a better offer, bigger downpayment, or mismanaged original funds that the buyer put down as deposit. Whatever the case, we hear horror stories all the time about people who were denied the chance to buy their Rent to Own. With Owner Finance:
- Buyer gets the Deed along with the keys. The buyer is now the actual owner of the home.
Owner Financed buyers are homeowners. There is no wait. Heck, they can move in and paint the walls pink if they want- they own the walls!
Picture courtesy of and work attributed to the-lane-team @ www.flickr.com
If you liked this article on owner financing, you may want to check out
brickhomepartners
