Is Owner Financing A Good Idea

Owner financing is where the owner/seller of the property you want to buy acts like the bank.

Instead of getting a traditional mortgage, the owner provides financing so you can buy the home you want.

Sounds great! No dealing with lenders and the home buying process, so, what’s the drawback?

Owner financing is typically much more costly in the long run and can introduce risk and unknowns into your home planning situation, which is especially awful if you’re trying to build wealth with real estate.

Owner financing is an ok, not good, but ok idea for people who cannot qualify under the tight restrictions of a regular mortgage. Owner financing is a decent short-term solution, but it should not be long-term.

If you enter into owner financing, you need to have a gameplay to get into a safer, cheaper, traditional mortgage within 3-5 years of starting the owner financing.

Here are some pros, cons, and what to consider when looking at owner financing:

Pros
- Faster closing - no processing time for the home buying process
- Cheaper closing - no bank fees or appraisal costs
- Flexible down payment - no bank or government-required minimums.
- A good option for buyers who are not able to secure a mortgage

Cons
- Higher interest - the interest you pay will likely be higher than what you’d pay to a bank.
- Will still need seller approval - even if a seller is game for owner financing, he might not want to become your lender.
- Owner responsibility - the owner doesn’t pay their mortgage
- Balloon payments - with many owner financing arrangements, a large balloon payment becomes due after five years. If you can’t secure financing by then, you could lose all the money you’ve paid so far, plus the house.
- Doesn’t go on credit so you don’t get the benefit of on-time mortgage payments
- Might not be recorded on title meaning you don’t own the house

What to watch for:
- Don’t worry about the rate or payment, owner financing is not a long-term solution
- Focus on “dangerous features” like interest only, balloon payments, etc
- Make sure the payment is within budget for you and your long-term gameplay
- Have an exit strategy

Hey, my name is Kyle and I'm a Mortgage Advisor serving Tennessee, Florida, and Ohio. My goal is to help you get a crystal-clear home loan that helps you win the house you love. If you're ready to create your home-buying plan, you can reach me through any of the ways below:

https://winthehouseyoulove.com/

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Motto Mortgage Alliance
https://www.winthehouseyoulove.com/
8900 N. Dixie Dr.
Dayton, OH 45414
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