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If you want to buy a home, but don’t have the money or credit to qualify for traditional financing, you may be a good candidate for seller financing. With this arrangement, the home seller agrees to carry the note or act as the lender. In turn, buyers make payments to the seller, and not a bank. Sellers carry the note for a specified time period, in which buyers are given ample time to improve their finances and credit, and qualify for a traditional bank loan.
- Find a motivated seller: To obtain seller financing, you’ll need to find a motivated seller. Most home sellers won’t consider this arrangement because they need their equity to purchase a new home. But if you can find a real estate investor, or someone who desperately needs to sell their property, you can probably negotiate seller financing.
- Make an offer: Even if the home seller has not considered seller financing, they may be open to the agreement. Make an offer on the property and express your desire to receive owner financing. Thoroughly familiarize yourself with the process and be prepared to give an explanation.
- Agree to financing terms: Once you have the home seller on board, it’s time to write the agreement and outline the specific terms. Seller financing benefits both parties. Homebuyers with bad credit or no money can obtain a home loan, and motivated home sellers can get rid of their property. But the arrangement isn’t permanent. Most sellers agree to carry the mortgage note for three to five years, and they charge interest during this time. At the end of the five year term, a lump sum or balloon payment is due. By this time, buyers should be able to qualify for a mortgage loan. If not, they’ll have to vacate the property. The seller financing agreement should clearly outline the future purchase price, contract length, and the interest rate.
- Get an attorney to review the contract: Before signing your name on the dotted line, consult an experienced real estate attorney and have the contract reviewed. This is a legal binding agreement, and an attorney can check the document for inconsistencies or loopholes.
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Michael Blue Jay, http://michaelbluejay.com/house/owner-financing.html