What is Owner Financing and Seller Financing
Being able to ask a seller who will help you to buy their home is a thing which listing agents and homeowners don’t consider. But for sellers who have homes that are not selling or for the buyers who have problems on traditional lenders, owner financing is the best option.
Owner or seller financing means that a homeowner could put up a part or all the money that’s needed to buy the property. In other words, rather than having to get a mortgage with a commercial lender, the buyer could simply 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.
On the financed portion, both the seller and the buyer has to end up with an agreement about the interest rates, monthly payments and on the schedule of the payments and other details that are important with the loan. The buyer also have to provide the seller a promissory note which states that they agreed with the terms. The note is also entered in public records which will serve as a protection for both parties.
Benefits of the Seller
It really does not matter if the property has an existing mortgage, although it’s possible that the lender of the homeowner could accelerate the loan during sale because of an alienation clause. However, the seller can retain the home’s title until the buyer can repay the loan fully.
Benefits for Buyers
Buyers that opts on a seller financing are able to have several advantages. Some benefits that can be obtained would be:
Lesser 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
If you compare this with the conventional loans, buyers and sellers can in fact choose various loan repayment options such as interest-only, fixed-rate amortization, balloon payments or less-than-interest if the state would allow it. The rates for its interest may periodically adjust or this may remain on one rate with the loan’s term.
Closing Costs are Lower
When there is no institutional lender, there are actually no loan or discount points and no origination fees, processing fees, administration fees or other kinds of miscellaneous fees that are being charged by the lender which automatically saves money on the closing cost of a 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.