The case of asking a seller to help you in buying their home is something that homeowners or listing agents go for. But for any seller whose properties are not selling or buyers who have problems when it comes to traditional lenders, an owner financing option is the best way to go for.
A seller or owner financing means that homeowners can place a part or perhaps all the money which is essential for buying the property. To put it simply, rather than having to take out a mortgage through commercial lenders, the buyer will just borrow the money from the seller. The buyer can actually finance the purchase through this way or they could combine the loan from the seller 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 has to be entered on the public records that will serve as the protection for the two parties.
Benefits of the Seller
It does not matter whether the property comes with an existing mortgage, though the lender of the homeowner may possibly accelerate more the loan during the sale because of an alienation clause. The seller will however be able to retain the title of the home until the buyer is able to repay fully the loan.
Buyer Benefits
Buyers who opts on seller financing can actually enjoy some advantages. Some of these benefits are as follows:
Lesser or No Qualifying
The interpretation of the buyer’s qualifications is mostly less stringent and is also more flexible compared to the ones that were imposed by the conventional lenders.
A Tailored Financing
Compared to conventional loans, buyers and sellers will be able to choose different loan repayment options like a less-than-interest, interest-only, fixed-rate amortization or balloon payments when the state is going to allow it. The interest rates also could adjust periodically or be able to remain with one rate on the loan’s term.
Closing Costs are Lower
If there’s no institutional lender, there are actually no loan or discount points as well as no origination fees, administration fees, processing fees or other miscellaneous fees of which the lenders charge that automatically saves money for the closing cost of the buyer.
Faster Possession
Due to the fact that sellers and buyers will not be waiting for the lender in processing for the financing, the buyers can close much faster and in getting possession of the property sooner than conventional loan transactions.