When you are self employed, have gone through a Divorce, had an illness in your family, survived a career loss or made it through a foreclosure, it can take a while before you have picked yourself up and dusted yourself off. At that point, you may have been momentarily relieved to find that you have a lot of company. Nevertheless, sooner or later, it’s time to bounce back. Alot of people find themselves in some sort of situation where they cannot qualify for traditional financing for a few years. Bad things do happen to good people and when it does don’t lose hope you can still buy a home but you may have to look for an owner financing deal instead. Check your financing capabilities here!
What is Owner Financing?
Owner financing is when a seller agrees to sell you their home but agrees to hold the note for a period of time as long as you have a down payment. For example you are looking for a home in Austin Texas or the surrounding areas and you see a home that has been sitting on the market for a long time. Maybe it has some needed repair that the seller cannot afford to fix like the roof, foundation or electrical. If the seller cannot fix these things when they put the home on the market the majority of the buyers looking for homes will more likely pass it by because they are looking for a move in ready home. Most first time home buyers are not ready to do a fixer upper. You see this home just sitting there on the market. Well what should you do? If the home is listed you should hire your owner buyer’s agent that is experienced with owner financing or seller financing and ask them to make an offer for you to the seller’s agent.
Agree to terms that you both can live with. Win Win!
You tell your agent you want to make the seller an offer with owner financing. In an owner financing transaction the terms can vary from seller to seller depending on their situation but in this case because you are making the offer you try to set the terms that you would like to have and see what the seller says to the offer. Your experienced Owner Financing agent will say to the the other agent. “Mr. or Mrs. Agent, I have a buyer that is interested in your home that you have listed. He would like to put 10% down as a down payment and have your seller carry the note for five years on a fixed rate and then the rate can go up to an agreed interest rate. The note will be amortized over 30 years just like a traditional loan but before the 5 years are up on the agreed low interest rate my buyer plans to refinance or if not he agrees to pay a higher interest rate until he refinances”. “My buyer plans on fixing up the house and invest thousands of dollars renovating it so it is a win win for both sides because if my buyer does not pay the mortgage you have the legal right the take the home back through a foreclosure process.” “ You get to sell your home to a buyer that is going to fix it up and the buyer gets to buy a home that he wants”.
Use Proper Disclocsures
After you and the seller have agreed on terms you then have your agent contact an RMLO (Registred Mortgage Loan Officer) because you have to be treated just like a traditional buyer and therefore you have to fill out the same paperwork any other buyer would except the seller will hold your note. You will close at a traditional title company that is familiar with owner financing transactions so that they can prepare the note, warranty deed and is familiar with the Dodd Frank Act loan processing. The process at the title company is the same as long as they get all the terms you both agreed on as far as the note goes. Make sure the title company has an attorney that know about all the legal paperwork that comes with this transaction because it is a legal transfer of ownership and the seller can no longer take home back unless you do not pay the mortgage and you default. You also have to know when your first payment is due because unlike a traditional loan this can also be a negotiable item. You should also escrow your taxes and insurance into the payment so that all gets paid in a timely manner. If you are looking for owner finance homes there are very few in a great market but there are still some out there and you have a better chance at targeting homes that are unable to sell for whatever reasons. Get prequalified here!