Owner financing and refinancing

7 Replies

Originally posted by @James Devoe :

Hi everyone,

I just made my first offer to buy a house. I want to use owner financing. How long do you have to wait to refinance on a owner finance?

 Why would you want to refi if you have weller financing in place?  What kind of terms did you get for from the seller?

@Joe

I don't have good enough credit to get a traditional mortgage, so I suggested this option to my potential seller as an alternative. My plan is to refinance after 6 months (after the rehab). However, I just read somewhere on line that this might not be so simple and that I might have to wait an entire year.

Any thoughts..?

Hey @James Devoe  

I am also unsure why you would want out of the seller financed mortgage so fast. They have some good advantages. I do not know how long you need to wait but you will need to own the property for a long enough period of time for a new lender to lend on it. This seasoning period is often 6 months. Also I would look into credit repair now so when you do go to refinance in the future your credit will allow you to do so.

@Jason Shackleton

My potential seller is an older woman and I don't want her to feel troubled by the thought of having the a long term loan that she's involved in. I'm not entirely sure that she's even going to accept this alternative as that she doesn't entirely understand how it works. I may, instead have to find another creative means of funding this deal such as a Hard-money lender.

The answer is always no if you never ask. One thing I've learned as a RE agent and lender, you never know what people will accept. I've shown houses that I would never buy in a million years, and my buyers love it. I'm not a big fan of paying points to get a better rate, but a low interest rate is exactly what some people want, even if it costs money to get it.

If she older, having a steady cash flow each month might be exactly what she wants. Just have to pitch it correctly.

The timeline should be anything you and the seller agree to. I say should be, because technically you could refinance as soon as you wanted (in theory) if you could find a bank to do it, but the seller will likely feel mislead because she would probably be expecting a few years worth of interest payments, if not more. If you don't have good enough credit to get a bank mortgage now, it will likely take a couple years to get to that point anyway. Assuming your seller agrees to an owner-financed sale, you should lay out your plan with a timeline so there are no surprises.