It can be tricky to ask the seller to provide you with owner financing to buy a home. If you ask the listing agent whether or not the owner is willing, the agent probably has no idea. If you ask the seller directly, they will likely refuse. This is because most owners have no idea about the benefits of owner financing to sell their home, and most have knowledge limited to conventional means of a buyer obtaining a mortgage through the bank.
In some cases, owner financing can be a real option, especially if the home is just not selling or lender guidelines have become too tight.
When all or some of the purchase price, after the down payment, is carried by the seller instead of the buyer, the seller is offering owner financing. Rather than using a bank, the buyer takes out a loan from the seller and makes monthly payments to the seller.
Sellers are more likely to agree to owner financing if the property is owned free and clear with no mortgage. In this case, the seller and buyer can agree on an interest rate, loan term and monthly payment and the buyer will pay the seller for equity on an installment basis.
Both parties are protected as the financial instrument can be recorded in the public records.
Sellers and buyers can negotiate most terms of owner financing, as long as both abide by usury laws and regulations. Most sellers will want a substantial down payment on the home to protect their equity, as buyers are less likely to go into foreclosure if they have money in the deal.
Some types of owner financing include:
As the buyer, there are several advantages to owner financing: