What Is Owner Financing?
Owner financing is a term used when a seller of a home finances all or a portion of the sale of their own property. This can also often be referred to as “Owner Will Carry,” “Seller Financing,” “Seller Carry-back,” a “Private Mortgage” or even as “Rent to Own / Lease Option” (though this is a different type of transaction entirely ~see box below~).
In an owner financed transaction, the seller acts as the bank and loans the new home buyer some or all of the money needed to purchase the owner’s property. One of the greatest benefits to buyers that purchase a home using owner financing is that they do not have to qualify for a loan at a traditional financial institution. Those individuals with sub-par or even bad credit, bankruptcies, foreclosures, and even the self-employed can all qualify for owner financed homes.
BEWARE of those individuals that are offering rent-to-own properties or lease option properties in the state of Texas. On January 1, 2006 a new law was enacted in Texas, following the Texas Senate approval of House Bill 1823, that made it virtually illegal to perform a lease option in Texas in which the option period ran longer than 180 days. (Most people will need longer than six months to establish or repair their credit in order to qualify for a bank mortgage) You can learn more about lease options in Texas here
Who Can Benefit From Using Owner Financing?
Just about anyone can get owner financing from Brick Home Partners’ owner finance program as long as they have steady income, can afford the monthly payments on the home they choose, and can afford a small down payment. Here’s a list of just some of the home buyer issues that we have worked with lately:
- Good / Bad / Ugly Credit ~ BHP Approved!
- Past Foreclosure ~ BHP Approved!
- Bankruptcy ~ BHP Approved!
- Divorce ~ BHP Approved!
- Self – Employed ~ BHP Approved!
- Declined a mortgage at the bank ~ BHP Approved!
- Own another home ~ BHP Approved!
What Other Benefits Are There With Owner Finance?
While the benefits are numerous, here are the top 5 perks to using owner finance when buying a home.
- Easy Qualifying!
With owner finance it is up to the seller to determine if the buyer qualifies and these qualifications are typically less stringent and more flexible than those imposed by conventional lenders. Examples of qualification requirements typically include the ability to make monthly payments as well as a small down payment.
- Down Payment Flexibility.
Down payments are negotiable. If a seller wants a larger down payment than the buyer possesses, sometimes sellers will let a buyer make periodic lump-sum payments toward a down payment.
- Lower Closing Costs.
Because there is no institutional lender in an owner finance transaction, there are no hidden loan or discount points to pay. Additionally, there may not be any Realtor fees to be paid by the seller which ultimately saves you money on buyer closing costs.
- Move In Fast!
Because you are not waiting on a lender to process the financing, buyers can close faster and get into their new home in days, not weeks or months.
- Improve Your Credit!
Making on time payments on your new owner financed home loan will help to improve your credit, ultimately saving you tons of money for other financed goods down the road.
How Do I Get Started?
The first step to buying an owner financed home is to tell us about the kind of home you are looking to purchase. You can click here to visit our buyer preferences page and tell us all about your next home.
Next, we will contact you about your preferences and will be able to suggest homes that fit your needs and financial requirements. (Feel free to look through our current inventory of homes before we contact you)
Once you have decided on a few homes that you would like to view, we will set up a time to view the homes together. If you like what you see, we will begin the easy application process and you will be on your way to homeownership. For more information on owner finance click here. For more information on foreclosures click here. For more information on owner finance topics click here.
Hi Danny,
It sure is. Banks can be tough these days, and many people are looking for alternatives. Thank you for your comment!
BHP
Great explanation on owner financing. I guess this must be a popular in your neck of the woods?