Hello everyone. Could someone please explain owner financing to me. I think I have a basic idea but I need the whole picture. Thanks
If you search BP for Seller Financing there is a ton of information. It was covered in podcast 13 but also may be a good topic for an #AskBP Podcast.
Basically if you own the house, you can structure payment to the purchaser any way you both agree on.
I hope that helps.
Every states little bit different if you're in DC I recommend that you find a registered mortgage loan originator to underwrite the buyer as per their ability to repay rules with the Dodd Frank
If this is your residence and not investment property it makes a difference
If there's existing financing on the property like a mortgage loan or a HELOC that makes a difference
If you could tell me what the fair market value of the property is, the existing financing, meaning the loan balance and the P ITI payment, and the market rent, I could help you
Very simple. The owner either holds clear title to the property, or has the "due on sale" clause waived for his underlying mortgage. Owner then finances purchaser directly preferably with a good down payment in place. Owner-occupant vs. investor does make a difference.
Hey Lawrence, I broker owner financed notes for a living to investors.
Owner financing aka, seller financing or sometimes "owner will carry" is a promissory note created by a homeowner who owns their home free and clear who wishes to sell their home on terms to a buyer. However, some people offer owner financing with a unpaid balance.
The traditional method would require the borrower to obtain traditional financing from a bank to purchase the house 100% from the seller.
Think of owner financing as a layaway plan.
Purchase Price: $100,000
Down Payment: $10,000 ( Should be 10%)
Note Balance: $90,000
Interest: 7% ( Would be higher for borrowers with bad credit)
Term: 15 years ( Keep the terms below 30 years)
Payment: $808.95 (Verify Ability to pay including taxes and insurance)
In essence, Owner Financing allows the homeowner who is selling to become the bank. Don't forget to run a credit check on the borrower and verify their ability to pay per changes in DODD Frank.
You may wish to google "Seller Finance Consultants" and download a FREE Dodd Frank compliant disclosure to include in your owner financing paperwork.
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