If you are on the market for buying a home of your own but don’t meet the requirements for a traditional mortgage, you might be surprised to learn that owner financed homes can help you on the path to becoming a homeowner. Instead of throwing away money each month on a rental payment, you can take advantage of an owner financed home to begin to build your own home equity. With owner finance options, your payments will someday allow you to own the home outright.
The way owner finance homes work is that instead of borrowing from a bank or mortgage finance company, the seller of the home can actually finance all or part of the purchase price. While partial financing is more common – if you lack funds for a deposit, for example – 100% financing may be possible depending on the terms the seller is willing to offer.
If you are seeking your home through real estate advertisements, you may not have seen owner financed home opportunities advertised. This doesn’t mean that they are not there. If an owner has had a property on the market for some time and does not want to reduce the price in order to make a sale, he or she may be willing to consider owner financing. Obviously, they would have to have the financial capacity to do this but you won’t know if you don’t ask.
There are also sites on the Internet that specialize in the owner finance homes market. Do be aware that even though you won’t need to meet the stringent standards of a conventional home loan, you will need to prove your creditworthiness and ability to pay before most sellers will consider owner financing. Also, you can expect your house payments with an owner financed home to be higher than what you would pay with a traditional lender, but if you have the ability to make these payments, owner finance homes can be a means to an end if you can’t get any other kind of financing. After you’ve built a solid payment history, you can always refinance with a traditional lender later on for a lower interest rate.
One of the most important things to do if you are considering buying an owner finance home is to hire an attorney to go over the contract and any other pertinent paperwork. You need to clearly understand what you are agreeing to, and you will want to make sure there aren’t any stiff pre-payment penalties that would prevent you from refinancing down the road. Understanding your rights and obligations is very important before signing a contract.
The benefit of owner financing for sellers is the ability to sell a home at full price quickly. But, buyers should be cognizant of the fact that sellers are not doing you a favor. Buyers must make sure to obtain a formal inspection of the property, survey property boundaries, and otherwise review all of the details about the property and the purchase contract.
In some cases, overeager buyers are quick to jump the gun and enter into an owner finance contract without really thinking it through. Make sure you’re not buying someone else’s problem home or being taken advantage of with a predatory lending contract. Doing your due diligence is important – resist the temptation to jump in with both feet without good research and planning.
Owner financed homes can provide a way to home ownership when obtaining traditional financing is not possible. If you go into an owner financed home with a long range plan, you can use owner financing to get into a home, and then obtain a traditional mortgage later on with better terms when your circumstances allow.
|
|