Owner financing is when a property is bought directly from the seller rather than through a bank.
While the numbers can vary, a rate typically ranges between 8% and 12%.
No, there’s no landlord in owner financing. Ownership of the property changes hands immediately and the house is yours.
An agency can help ensure that everything is legal and in order so you don’t have any nasty surprises later.
Sellers often choose this option because it allows them to sell their home quickly. It also saves them from having to make the improvements that a real estate agent may recommend to them.
It’s a great option for those who don’t want, or can’t qualify for, a traditional bank loan. The process is less regulated so lenders are free to work with people with little or no credit history, or bad credit. This option helps many people buy a house who would otherwise be unable to.
Typically you’ll have 30 years to pay off the house. You can however finish the process sooner if you’re financially able to. Sometimes, you’ll make a monthly payment for 5 to 10 years and then have one last large payment to finish things off.
You should have an inspection completed to ensure that there are no major issues. Structural problems or roofing issues can end up being very expensive, so it’s better to find out in advance if there are problems.
A lender will check into your financial history, request that you fill out an approval application, and ask for identity confirming documents. It’s a good idea to have bank statements, proof of income, and asset documents on hand when you apply. You’ll also need a photo ID and your social security card or the equivalent.
It’s advisable to check your credit report yourself before you apply so you know where you stand. The numbers change often, so keep that in mind.
In most situations, you’ll pay the property taxes. Make sure this point is addressed in your initial agreement so no one is confused about what’s expected of them.
Closing costs are typical to any real estate transaction; however many times they can be negotiated and paid by the seller.