Did you know that some sellers are willing to finance the sale of their own home? They want to sell quick and they want to make it easy for you. They provide an alternative to borrowing from the bank for your home purchase.
These seller financing deals aren’t usually advertised or easy to find. Many sellers just don’t know about this option so it never hurts to ask. The 3 main reasons buyers are interested in seller financing are:
- They are self-employed and don’t have enough documentation to satisfy the bank.
- They don’t qualify for a regular mortgage.
- They don’t want to hassle with the bank and investor taking advantage of the current housing market.
If a seller finances the sale there are no closing costs or time spent waiting for banking approval. So there are no mortgage insurance premiums, loan origination fees, or discount points and it speeds up the time till closing. Buyers can negotiate their own terms and possibly get better deals. An average charge is 7 to 10 percent with 20 percent down, but it can go down to zero-interest through negotiations.
To find sellers that are more open to this type of financing, look for homes that have been paid off and for sale for a while. The seller wants to get rid of the costs of property taxes, insurance, and maintenance so they might be willing to use this type of financing.
You can avoid bank hassles by seller financing but you should still have an attorney involved. You should check with the title company to make sure the title is clear and there is no mortgage on the property. It is legal to sell a property that has a mortgage, but the current mortgage usually has to be paid in full if the property is sold.
Sellers can also take the buyer’s payment each month and meet the mortgage agreement. That enables them to get around the mortgage “due-on-sale” clause, but the title doesn’t get transferred until the loan is paid off. It is definitely riskier to deal with a home that still has a mortgage.
For more detailed information on this financing option, read the full story here.
It is helpful to offer up two options when buying a house from someone that does not owe anything. You can offer up an all cash option, with a lower purchase price. And, you can offer up an options where they get a higher purchase price but will need to owner finance the house. Some people don’t need the money all in a lump sum and would actually prefer to receive monthly payments without the hassles of a tenant. You own the house, you unclog the clogged toilet. They may even be willing to sell at the same price as your all cash offer as they will be receiving interest.
Great post.
Trevor –
How do you get around the SAFE Act of 2008 that basically prohiblts almost all types of seller finanacing unless your are a mortgage broker?