Seller financing opportunities can be life changing for borrowers who may be currently unable to obtain a traditional loan from a lending institution in a tight credit market. With strict lending guidelines, self-employed people or business owners may find it challenging to get approved to buy a home without a weekly pay check to justify their income. A seller carry option could be ideal for buyers in this situation, allowing them the opportunity for home ownership and all the benefits that come with it –without the restrictions.
Seller financing, otherwise referred to as an “owner carry,” is when the owner of a home takes on the role of lender. As in any sale, the buyer and seller agree on a sales price, and the buyer extends a down payment. However, instead of the buyer using an outside lender to provide the seller payment in full, the seller acts as the lender, collecting the down payment, then receiving monthly payments until the promissory note, or balance, is paid off. This loan is recorded as a deed of trust, and secured by the equity of the property and the borrower pays back the loan over time at a fixed rate.
Typically with owner financing, the loan is amortized over 30 years, but due sooner with a large balloon payment, for example in 5-10 years. The theory is that the hone will continue to appreciate in value, and as equity is paid down the borrower can refinance with a traditional institution to pay the note.
The benefits of this opportunity are plentiful for a buyer that may have challenges qualifying for a traditional mortgage. With a sizeable down payment, and the ability to pay monthly, these buyers can reap the benefits of homeownership where they may not have been able to. For a seller with a home that is paid off, this is an opportunity to earn a larger return on their investment. With an interest rate higher than the current market rate, it’s a chance for the seller to make a return on their cash at a higher rate than if it was invested in a savings account or stocks.
There are a handful of different seller financing opportunities available, including: all inclusive mortgage, lease option, a junior mortgage, or an assumable mortgage.
It is important to hire a professional real estate agent or real estate attorney to assist both parties in negotiation and drafting the paperwork.
If you have any questions regarding how to move forward with this as a buyer or a seller- we’d welcome the conversation and phone call. In fact, we have a listing on the market right now with a seller willing to offer owner financing and is actively looking for a buyer.
For more information on this property: http://tinyurl.com/q5pcuey
Hoffman Murphy Team
310-939-9393
Comments(0)