Buying a House With Owner Financing

On February 22, 2011, in Financing, by Justin

Possibly the most popular way to buy a property without bank financing is the use of what is called owner financing, or seller carryback. This is when the owner agrees to finance all, or part, of the purchase price of the home. Owner financing is a great strategy that can benefit both parties significantly. The buyer can avoid difficult bank processes, and the seller can create a monthly income stream which often comes with many tax advantages as well.

Each instance of a seller carryback loan can be custom fit to the buyer and the seller. The valuation of the loan, the payment terms, interest rate, can all be set in the purchasing contract. There are a surprising number of people who own their home free and clear, or have a large amount of equity, and would eagerly consider owner financing.

Seller carryback loans are a great opportunity to get creative! The buyer can arrange to make a single payment after a period of time (to give the opportunity to rehab the property), substitution of collateral, blanket mortgages, wrap-around mortgages, etc. In the current economic climate, it is becoming more and more difficult for a buyer to qualify for a loan, which is taking longer and longer to close. Seller carryback loans can resolve credit and time crunch issues to get homes sold in record time!

Both buyers and sellers should be aware of recent legislation that prohibits owner financing without a mortgage originator?s license. This doesn?t mean owner financing is impossible, but both parties should find a credible mortgage originator to mitigate the terms and conditions to keep the transaction legal.

When everyone is fighting in the same arena, take the opportunity to try something new to make yourself stand out. You might find yourself pleasantly surprised, with a new home!

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