Owner Financing is a win-win solution.
Owner financing is when the current owner of the home is financing the home purchase by the new buyer. From the buyers point of view, the only difference from the common home purchase process is that loan to purchase the home comes not from the bank, but from the current owner.
On a very rare occasion the buyer pays full purchase price of the home in cash. Most likely buyers have to borrow money to fund part of the purchase price. If a buyer gets a loan from the bank it would be called bank financing. If a buyer gets a loan from a current owner fo the home it is called owner financing. That is the only difference - who is lending money, third party like your community bank or the seller.
You may be wondering why would a seller offer owner financing? Owner financing gives a lot of benefits to both buyer and seller.
Buyer benefits of owner financing:
- The most obvious is that the buyer does not have to go to the bank and jump through hoops to get a loan.
- Qualification process is simple, fast and straightforward. There is no committee to approve you since you are dealing with a single individual.
- Usualy there are no points or fees, which means that your closing costs are much lower then compared to bank financing.
- It can be done in couple of days, which means that you can move into your dream home sooner then later.
Seller benefits of owner financing:
- Seller can attract much more serious buyers then listing with an agent.
- Seller gets a tax advantage - there is no huge capital gains tax bill.
- The home sell much faster then listing with a real estate agent.
- Seller received reliable and predictable income over the life of the loan
As we can see owner financing is a win-win situation for both sellers and buyers, so if you are in the market for dream home, do not be afraid to ask if the seller will be willing to finance the purchase. Do not be afraid to ask, in the worse case scenario the seller will say "no", but you will never know if you won't ask.
