What is Owner Financing and Seller Financing
Trying to ask a seller to help you make the purchase of their home is something which both listing agents and homeowners don’t consider. For sellers who have their homes not selling and buyers having problems with traditional lenders, the best option that’s available would be with owner financing.
Seller financing or owner financing means that the current homeowner can either put all the money needed in buying the property or just put up a part. Rather than having to take out a mortgage with commercial lenders, the buyer will borrow the money from the seller. A buyer may finance the purchase completely in this way or they could combine the loan from the seller together with the bank.
When it comes to its finance, the buyer as well as seller should be able to agree on an interest rate, monthly payment amounts and schedule and also on other details about the loan. The buyer must also give the seller a promissory note which says that they agreed on the terms. The note has to be entered on the public records that will serve as the protection for the two parties.
It does not matter whether the property comes with an existing mortgage, though the lender of the homeowner may possibly accelerate more the loan during the sale because of an alienation clause. But the seller may still be able to retain the title of the loan until the buyer can repay the loan in full.
A buyer who will opt for seller financing will be able to enjoy some advantages. Some of these advantages are:
Less or No Qualifying
The seller’s interpretation with the buyer’s qualifications are less stringent and this is also more flexible compared to the ones that are imposed by the conventional lenders.
Financing is Tailored
Compared to conventional loans, buyers and sellers will be able to choose different loan repayment options like a less-than-interest, interest-only, fixed-rate amortization or balloon payments when the state is going to allow it. The rates for its interest may periodically adjust or this may remain on one rate with the loan’s term.
Lower Closing Costs
If in case there’s no institutional lender, there will be no discount points or loan, no origination fees, administration fees, processing fees or miscellaneous fees which will be charged by the lender that will help to automatically save money for the closing cost of the buyer.
With the fact that buyers and sellers will not be waiting on the lender in processing for the financing and buyers can close faster and will get the property’s possession sooner than conventional loan transactions.