You’ve dreamed of owning your home for years and you’re finally ready to take the plunge and start looking. After searching through countless websites, you finally find your perfect dream home and it’s available through owner financing.
Owner financing is different than a traditional mortgage in that you don’t get a loan through the bank, but instead, work with the current owner of the home and pay them directly. You create a contract and agree to pay a down payment, monthly payments, etc. and when the contract is done, the deed is transferred to your name.
There are many pros and cons associated with this type of financing versus the more common seller financing through a lender.
Owner Financing Is Simpler
When you want to get a home loan, there are many hoops to jump through. You go from bank to bank comparing mortgage rates, loan terms, and more. The bank wants pay stubs, tax returns, and other information before they even think about giving you a mortgage loan.
With owner financing via houses for sale by owner, you deal directly with the owner. There aren’t any banks or hoops to jump through. Everything is hammered out between the two parties. When it’s finished, they create a legally binding contract.
There’s no Realtor or lawyers to deal with unless you want them there.
A Better Choice for Troubled Credit
The biggest determining factor in getting a mortgage is your credit report and credit score. If you have a history of defaulting on loans or being late on bills, then it. If it gets too low, then you’re stuck with high-interest rates, or you can’t get a loan at all.
The mortgage process is stacked up against those with bad credit because banks consider you too much of a risk. Owner financing eliminates that obstacle. The owner can still offer you a mortgage contract regardless of your credit score(does matter of building credit score).
They may want to see it, but it isn’t a guarantee of denial. You must convince the owner that you’ll make the payments on time.
Property Closing and Other Costs Lower for a home is thousands of dollars because of the many people involved. There is the bank, the Realtor, a lawyer, and more who draft up the mortgage papers, so you can own a home.
Owner financing lowers these costs because there aren’t as many people involved. Realtors want their cut and lawyers are expensive. You cut out the middleman, but you also open yourself up for trickery. While you don’t need a lawyer for the entire process, you should have one look at the final agreement before signing it.
These contracts may contain a balloon payment that needs to be paid at the end of the loan. If you’re not prepared, then you could end up losing the house after paying for it for years.
Weigh Your Options
Owner financing is only one type of financing available. Take your time and decide which is best for you. You may want the security that a bank loan provides of the lower cost of an owner-financed contract.
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