Balloon on Seller Finance Note

[Randon B.]

I am about to put a house up for sell and I would like to sell finance the note. I was told that if I was selling to an owner occupy then I could not add a balloon as part of the note. Though if I was selling to an investor I could. 

How do you differentiate between an owner occupy and an investor during the procuring process?? Is it as simple as just asking? But who's to say they wont rent it out after closing etc?

[Bill Brandt]

This is a paid off house? Or a house you can pay off with the buyer’s deposit even after paying the realtors? (Since your mortgage will have to be paid off at sale.)

Are you targeting buyers who can’t qualify for normal financing or selling for a lower price/interest rate to encourage the seller financing? 

Don’t forget, if interest rates drop in a year they can just refinance and pay you off so you are only guaranteed payments if interest rates go up and you’re charging under market rates, possibly losing more money on the deal. 

Be very careful with any loan dons for owner occupants, too many laws you don’t want to violate. Maybe involve a loan services. Good luck. 

[Chris Seveney]

@Randon B.

Work with a 3rd party MLO to do the loan for you and qualify the borrower

I believe you can do a balloon but should be no less than 5 years for the balloon.

[Eliott Elias]

That's not correct, either way I wouldn't balloon it. The longer the loan term the more money you make and the longer you offset your taxes. 

[Robin Simon]

You were probably told to stay away from owner-occupant loans because of the licensing and legal regulations around it.  It might not be prohibited but lots of hoops and requirements.

Generally, there are little regulations against investor loans because its assumed the investor is running a business and knows what they are doing, and the downside is just a loss of invested assets

Much more regs on owner-occupied because most owner-occupants aren't in the real estate business, can't be reasonably expected to know all the details of RE transactions (they might make a couple of house purchases in a lifetime) and downside would be loss of home, not just investments

[Randon B.]

Quote from @Bill Brandt:

This is a paid off house? Or a house you can pay off with the buyer’s deposit even after paying the realtors? (Since your mortgage will have to be paid off at sale.)

Are you targeting buyers who can’t qualify for normal financing or selling for a lower price/interest rate to encourage the seller financing? 

Don’t forget, if interest rates drop in a year they can just refinance and pay you off so you are only guaranteed payments if interest rates go up and you’re charging under market rates, possibly losing more money on the deal. 

Be very careful with any loan dons for owner occupants, too many laws you don’t want to violate. Maybe involve a loan services. Good luck. 

This house is paid off. Yes thats fine if they pay me off in a year. Im not really targetting anyone besides those that can prove income and are wanting to buy a house. Yes that is why Im here asking additional questions. 

[Randon B.]

Quote from @Chris Seveney:

@Randon B.

Work with a 3rd party MLO to do the loan for you and qualify the borrower

I believe you can do a balloon but should be no less than 5 years for the balloon.

 Yessir, working with Texas Prime lending to go through the qualifying/disclosure processes.

[Randon B.]

Quote from @Eliott Elias:

That's not correct, either way I wouldn't balloon it. The longer the loan term the more money you make and the longer you offset your taxes. 

 Yes I agree. 

Though what is correct?