Facts About Buying an Owner Financed Home in San Antonio TX
Owner finance can be a terrific way to get into a San Antonio TX home if you are lacking credit or even building it. There are some things you need to be aware of when you are trying to find a home where the owner is willing to do an owner finance. 
First, you probably need to find out if the owner actually owns the home out right. If the owner has an existing mortgage on the home, "technically" he or she cannot owner finance. Their lender most likely has a "due on sale" clause in their documents stating that if the owner doesn't follow the agreement with the lender (such as selling the home) then the lender can accelerate the loan if they so choose and the full amount of the loan will become due immediately.
Although a seller can't "technically" owner finance the home, as long as the original lender is aware of what the seller is doing, many times the lender will be ok with it...as long as the original payments are being made.
When there is an existing mortgage on the home, the owner will need to do what is called a Wrap Around Mortgage. This means that the seller will "loan" you an amount and wrap it around his existing mortgage. As the buyer, you will sign a promissory note and create a subordinate mortgage. The seller will become a lien holder.
There can be a couple of pitfalls to this arrangement and there are risks to both buyer and seller. Typically, with any type of owner finance, you will be required to put a large sum of money down and "finance" the rest through the seller. You will most likely pay a higher interest rate as well. With a wrap, the seller is still required to make payments to the original mortgagor...if they don't do this, the lender (mortgagor) can foreclose on the home leaving, you the buyer with no recourse and your down payment and any subsequent payments gone with no recourse.
For the seller, if you as the buyer don't pay, they do have the right to foreclose on you. This can be a very expensive and lengthy process as well and they still have a mortgage to pay.
In an straight owner finance where the owner has no mortgage, the process is a bit easier as the owner is the only "lender". There could still be some risks to you as the buyer.
Many times sellers aren't used to being lenders so it's important that you come to an agreement about how you are going to receive your statements, and if escrow will be required and if so, will the seller/lender ensure that taxes and insurance are paid when they are owed. Sometimes a seller will higher a third party payment company to handle all of the mortgage payments and escrow statements.
When looking specifically for Owner financed homes for sale in San Antonio TX, here are some terms you might see a seller requesting when they are willing to finance.
10% to 25% down payment (I have seen some as high as 50% down)
A higher interest rate..can be anywhere from 6% to as high as 15%
25 to 30 year amortization- This means they will take the price of the home and interest rate and calculate the monthly payments over 20, 25 or 30 years.
Balloon Payment after a certain time period...usually over 3 to 5 years...sometimes more. A balloon payment means that the seller will want the rest of his or her money at the end of 3, 4 or 5 years. Sellers typically don't want to be lenders for 25 or more years. They want the rest of their money sooner than that.
It's perceived that although you may not qualify for a typical loan right now, in three, four or five years, you should be able to. After the agreed upon time period, the seller would expect that you get a typical loan for the remaining amount owed and pay him the rest of the mortgage.
A seller will most likely require a credit report from you, proof of job history and proof of funds. Yes, the credit requirement is generally less in an owner financed home, (otherwise you would get a loan through typical means); however, the seller is going to want to make sure that you are still a good credit risk and can pay for the home.
If you are looking to buy a home in San Antonio with an owner finance, it's very important that you seek the advice of a local Realtor® who can guide you through the home buying process and who is familiar with taking buyers through an owner finance and asking all the right questions. It is also a very good idea to go consult with a Real Estate Attorney to look over any contracts you may have and or go through a reputable Title Company here in Texas who will ensure that all the i's are dotted and the t's crossed.
Again, owner financing can be a terrific way to buy a San Antonio TX home if you have enough for a down payment but your credit isn't up to where it should be to get a loan and or you are trying to build your credit up. If you are looking to buy a home in the San Antonio TX area or are looking to purchase a home through owner finance, give me a call and I can help you! In the mean time, check out these San Antonio TX Owner Finance Homes for Sale!
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$210,000 : 9323 SPRUCE CRST, San Antonio4 beds, 2 full, 1 part baths
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$899,000 : 24 MORNING GRN, San Antonio3 beds, 3 full, 1 part baths
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$35,000 : 2348 DAKOTA ST, San Antonio2 beds, 1 full bath
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$80,000 : 5811 KNOLL KREST ST, San Antonio4 beds, 2 full baths
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$89,900 : 4207 Mystic Sunrise Dr, San Antonio4 beds, 2 full, 1 part baths
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$169,000 : 6947 Elmwood Crest, San Antonio4 beds, 2 full, 1 part baths
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$287,000 : 4103 SMOKEY BEND WAY, San Antonio4 beds, 2 full, 1 part baths
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$74,900 : 7906 Winsford Dr., San Antonio3 beds, 2 full, 1 part baths
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