Can’t Get a Traditional Mortgage? Try Owner Financing!

Published by julia | Filed under Buyer / Seller Tips, Miscellaneous, Real Estate, Shout Outs

Are you trying to buy a house…any house…but finding that you simply don’t qualify for a mortgage? Many people are finding themselves in this predicament nowadays, especially with mortgage lenders becoming much more careful about who they’ll lend to. When you find yourself in this situation, owner financing can offer a perfect solution for you to get into the home of your dreams without needing a traditional mortgage at all.

Owner financing is when the seller finances all or part of the sale of the house to you. Sometimes this process is referred to as “owner will carry,” which essentially means that the owner will carry the mortgage. The owner of the home becomes your bank and will loan you the money you need to purchase the home that the owner is selling.

The main advantage for you here is that there are no credit checks and no banks to deal with. This means no copious paperwork or having to dig up old financial statements from years ago. You can also get into the house a lot quicker with owner financing. There are also advantages to the seller in selling the house this way. There are tax advantages to spreading out the time that it takes the seller to get all the money for the house. There’s a big tax penalty for getting all of the money at once. The seller can also continue to earn a monthly income from the property even after selling it, and won’t have to act as a landlord (as in handling repairs and such), because he technically won’t own the house anymore. The house will be signed over to you, and if you default on payments, the owner will have to foreclose on you, just as a bank would if you had a regular mortgage.

One more important advantage to the seller is that he can charge you interest on the money he’s lending you, which increases the eventual sales price of the property. The seller can often get more than the house is actually worth this way.

Offering seller financing is a great way to increase the pool of potential buyers for a house in a credit crunched real estate market. That’s why you’ll likely be seeing more and more sellers offering this option as long as the housing crisis continues. If you want to buy a house and a mortgage isn’t an option, this type of creative financing is something you may want to consider. It may just be the thing you need to get into the house you’ve always wanted!