What is Owner Financing?

If you’re a buyer having difficulty securing a traditional mortgage with a bank, purchasing a house with owner financing could be the way to go.

As a buyer, getting a mortgage can be difficult if your financial situation doesn't fit into neat little boxes—a predictable salary that can be documented with paycheck stubs and W-2 forms, a stable employment history with no interruptions, and a great credit score. Owner financing is just what it sounds like: instead of the buyer getting a loan from the bank, the person selling the house lends the buyer the money for the purchase.

The buyer and seller create a promissory note providing an interest rate, payment schedule, and an outline of the consequences for default. Instead of paying a bank each month, the buyer sends the monthly payments to the seller. As with a traditional mortgage, the buyer is still responsible for paying property taxes and obtaining homeowners insurance.

Owner financing has many advantages for buyers:

1. The closing process can be faster.

The deal closes faster as there is no waiting for the bank loan officer, appraisers, underwriter and legal department to clear the file - a process that easily stretches 1-2 months or longer.

2. Closing costs are lower.

Buyers love owner financing because they can get in the home for less money. They do not have to pay all the bank fees and appraisal costs.

3. The down payment amount can be extremely flexible.

Instead of having to meet a bank or government-mandated minimum, the down payment amount can be whatever the seller and buyer agree to. This doesn’t mean that the seller will accept a down payment that is lower than what the buyer would be required to pay elsewhere, but it's always a possibility.

We would love to answer any questions you might have about owner financing or working with us to buy your next home. Feel free to email us at [email protected] or call us at 214-643-8080 to speak with us personally.

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