Among the many options for home financing available to buyers, financing by owner homes often offer the most flexibility. By working with an individual seller rather than a mortgage lending institution, you have the opportunity to skip considerable amounts of red tape and extra fees.
But what exactly is owner financing? Here are some of the basics buyers should know:
Owner financing, also called seller financing, is when the owner of a property for sale provides partial or complete financing to the buyer directly. The agreement is similar in concept to a mortgage loan, only that the property owner owns the debts. Owner loans typically do not appear on buyers' credit reports for a particular transaction.
Owner financing agreements work similarly to conventional mortgage loans. However, the seller provides credit to the buyer to cover the purchase. The buyer pays the owner back directly rather than a third-party lender. In most cases, the owner holds on to the title until the home has been completely paid off.
As with all real property contracts, owners' financing arrangements need to be detailed in writing so both the buyer and the seller know the responsibilities of the contracts. Owner financing agreements require signing a promissory note including details on the interest rate, repayment schedule and the consequences of default.
For buyers, there are multiple advantages to an owner financing agreement. This type of financing is much quicker than working with a mortgage lender, and doesn't come with any bank fees or appraisal costs. It can be a great option for buyers who have trouble getting financing for other reasons like bad credit.
However, one major disadvantage of this type of agreement is a higher interest rate. Also, some agreements require a large balloon payment due after a certain number of years.
Is owner financing the right way for you to buy a home? Keep these key facts in mind when weighing your options for financing your dream home.
I have been a full time Realtor in Brunswick County since 1994, after moving here from the Charlotte area. Prior to that, I graduated from UNC Chapel Hill and worked as a press photographer in Fayetteville and Monroe, NC. It has been wonderful living and working in this community and raising my family here. I feel a little bit guilty for enjoying sunrises and sunsets over the ocean while friends inland can only see that while on vacation! I hope I can help you find your own bit of paradise here at the coast! I have always made every effort to treat clients as I would members of my own family... with honesty, integrity, and the benefit of my considerable experience! Let's see how I can help you!
