There are many variations of owner assisted finance. If the seller owns the property free and clear, he can offer the buyer a first loan , using terms and an interest rate of the owner's choosing. Typically, this will include a private trust deed. It may be a fully amortized loan, or an interest-only loan with balloon payment.
Another type of creative financing is a second loan . This is where the seller carries a second mortgage in order to help finance part of the purchase. A buyer who can qualify for only part of the purchase may be assisted by a seller who is willing to carry 10% or 20% of the purchase cost, using a private, second mortgage.
Yet another option is an assumable loan . If an existing mortgage has an assumption clause, the buyer may be able to take over the payments on this loan. Under this arrangement the buyer will still pay the seller a 10% to 20% down payment. Loan assumption usually requires approval from the underlying lender.
There are several other forms of seller financing, such as a land contract, wrap around mortgage, or AITD (All Inclusive Deed of Trust), but in today's more restrictive lending environment, these types of financing arrangements are risky and may be difficult to accomplish.
I f you are interested in an owner-will-carry home, please let me know what YOU are offering when you e-mail me.
After viewing owner financed home listings, potential buyers often e-mail me asking, "what are the terms?" First, the terms are rarely if ever published in the MLS. There are no pre-set fields for owner finance or owner carry, so the listing agent typically highlights the field for "Owner may carry": only. When calling the listing agent, the response is often "the owner is flexible. What is the buyer offering as far as down payment? Interest rate? How much do they want the owner to finance and for how long?", etc. The agent will always want to know what YOU are offering , so let me know how much you have for a down payment, your credit status, how much you are looking to have the seller finance, and for how long, before I call the agent for details.
Please note: The MLS is no longer feeding owner finance data to third party web sites. If you are interested in a list homes offering owner financing, contact me directly and I'll send you a list of homes contact me
* Includes properties with seller financing in Dove Canyon, Robinson Ranch, Rancho Cielo, Las Flores, and Wagon Wheel Canyon
There are several advantages to you, the buyer, of purchasing a home that has seller assisted funding.
Easier to qualify - You will not have to qualify for a loan at a traditional financial institution
Lower closing costs - You will not have to pay points or certain closing costs, possibly saving you several thousand dollars
Better interest rate - The interest rate on the owner financing may be lower than what is currently offered by standard lenders
Seller financing is especially advantageous to first time home buyers, or to buyers who are having a difficult time getting a conventional loan. It may be the home buying answer for people with short job history, the self-employed, low cash reserves, or other issues. Seller financing may also be a great option for real estate investors, as the financing terms may be better than terms offered by banks and mortgage lenders.
Approach seller financing with realistic expectations . You may not be able to reach financial agreement on your first choice of homes, so be prepared to negotiate on several homes until you find one with suitable terms.
Pay careful attention to the financing terms . First and foremost is the sales price. A seller may wish to ask market value for the home in exchange for seller financing, but make sure you are not buying a home that is grossly over-priced. Have your Realtor run comparables ("comps") for the home to ensure that you are paying a fair price. Second, go over the financing details with your Realtor, such as the interest rate, monthly payments, and financing duration. While a conventional, fixed rate loan is typically amortized over 30 years, a seller may only wish to finance a loan for 5 or 10 years. There may also be a requirement for you to re-finance the loan and pay off the seller at some designated period of time. Study the details carefully!
You may be required to pre-qualify . A home owner offering seller financing may ask that you pre-qualify or get pre-approved with a conventional lender. This is to ensure that you are qualified to make the monthly payments, even though the payments will be to the seller. There may be a small fee for this service to the lender.
Be sure you can afford the home . Seller financing is not an excuse to live beyond your means. Even though the seller is carrying all or part of the loan, you need to be sure you can afford the monthly payments as well as the other costs involved with home ownership. These include property taxes, insurance, HOA dues, Mello Roos, or other costs that may apply. A Certified Mortgage Planner can assist you in getting pre-qualified for the purchase, and can also help you understand how much house you can comfortably afford (call me and I'll be happy to refer you to a Certified Mortgage Planner).
You can be turned down. "Owner financing" may be listed as an option on a property, but it is not guaranteed. The home owner may legally refuse to sell the home or agree to owner financing if you have very poor credit, a bankruptcy, too much debt, no down payment, too little income, etc.
Don't try to go it alone! You will need professional assistance to negotiate and complete a seller financing transaction. Get a qualified Realtor (like myself) to assist you. Your transaction will be processed through a licensed escrow and title company. Most importantly, I will ensure that your seller financed real estate transaction is safe and legal! If you are interested in a seller financed property, call me today, at 949-290-3263!
Many hopeful buyers who do not qualify for a loan or who have very poor credit often look to owner-financing as some kind of "magic" solution to get into a home. Since putting this web page together, I have received dozens of calls from people hoping to own a home using this method and unfortunately, the reality is that in most cases, it is NOT a solution for them. There are very legitimate seller-financing situations out there, but they are rare, and they are only suitable for a only small number of buyers. For many other buyers, especially those with poor credit, seller financing is not a realistic option. My Frequently Asked Questions below may answer many of your questions:
I found a home I like on your web site. What are the financing terms?
This is obviously the most frequently asked question. First, I never know the terms for a particular home because terms for owner financing or for lease-options are never published in the MLS . This is because there are no provisions for the fields in the MLS, plus these types of transactions are done very infrequently. As a result, it is strictly a phone call business. Second, most sellers do not have a specific set of terms. If they are fortunate enough to be able to offer some type of financial assistance, they usually want to know what you are offering (see my TIP above).
Do I need good credit or a down payment to take advantage of owner financing?
Yes! Unfortunately it is a myth that seller financing is for buyers with poor credit or no down payment. Realistically, the few sellers that are offering buyer assistance will do so only for buyers with adequate credit and some reasonable level of cash down payment.
What is the main type of owner financing being offered?
This is obviously a broad question, but most owner financing involves sellers who are willing to carry a second . This means they are offering to carry anywhere from 5% to 20% of the purchase price (you would still need to acquire a new first TD). Another type is short term assistance . An example would be a seller who will finance the balance of the loan for something like 5 years. They are still asking for a substantial down payment and the loan would have to be re-financed after 5 years. There is the occasional seller who is wiling to carry a new first trust deed . These sellers are rare, as there are few sellers who own their home, outright. If we do find one, they will still want a solid buyer with good credit and a normal down payment ranging between 5% and 20%.
I have also run into a lot of listings offering seller financing in which the seller is in foreclosure . My belief is that the listing agent is attempting to offer seller financing as a means to help the seller get out of the foreclosure. In my opinion this is very shaky, except in the case where you (the buyer) would be wiling to bring in enough cash to pay off the amount in the rears, plus pick up the full outstanding loan balance (no small feat).
Finally, it is unfortunate, but there are few if any sellers who are offering to finance 100% of the purchase . Sorry, there is just no "free lunch" out there!
Do you know of any homeowners who may be in distress and will let me take over their payments?
No, and I would definitely advise you to stay away from these types of transactions. A distress sale of any kind is risky, whether you are considering a lease, lease-option, or owner-financing. As I said above, there are a number of agents who are listing homes with owner financing where the owner is in foreclosure. They may be trying to offer an AITD or other creative solution, so use caution and be sure you fully understand the terms and the risks.
I will add a lot more to this section so please check back!
Owner or seller financing is suitable for someone who:
Is self-employed and is having trouble documenting all of their income for conventional financing
Is being released soon from a bankruptcy
Has sufficient income and a reasonable down payment (10% to 20% down)
Has good to excellent credit
Owner or seller financing is unsuitable for someone who:
Has little to no down payment
Has poor credit
Has insufficient income to make the monthly payments
Owner financing myths
The owner will finance 100% of the purchase - Owners offering full or partial financing will typically ask for a 10% or 20% down payment!
The owner will entertain financing if you have poor credit or if you cannot document your source of income - No, they will not!
The owner will allow you to take over an existing loan - Very few existing loans are assumable!
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