Buyer's Guide

Owner financing (also called seller financing) is when the property seller acts as the lender. Instead of going to a bank for a mortgage, you make payments directly to the seller over an agreed-upon term. You still receive the deed and own the home — the seller simply holds a promissory note secured by the property. This method has been used in real estate for decades and is completely legal in all 50 states. It's especially common when buyers have credit challenges that prevent them from qualifying for traditional mortgages.

Owner financing is ideal for: • **Self-employed buyers** who have trouble documenting income for traditional lenders • **Buyers with bad credit or no credit** who can't qualify for conventional mortgages • **Buyers with cash for a down payment** but not the credit profile banks require • **Investors** who want to acquire properties quickly without the mortgage process • **Anyone who's been turned down by a bank** but has the income to make monthly payments If you have steady income and a down payment, owner financing could be your path to homeownership regardless of your credit score.

Down payments on owner financed properties typically range from $10,000 to $100,000+, depending on the property price and the seller's requirements. Here's a general guide: • **$10,000 - $15,000 down** → Entry-level homes, smaller properties, or properties needing some work • **$15,000 - $25,000 down** → Mid-range homes in decent neighborhoods • **$25,000 - $50,000 down** → Higher-end properties, newer construction, desirable locations • **$50,000+ down** → Premium properties, larger homes, luxury markets A larger down payment generally means lower monthly payments and a better interest rate. But even $10K can get you into a home.

Interest rates on owner financed properties are set by the seller and typically range from 6% to 10%. While this may be higher than prime mortgage rates, consider: • **No credit check** means the seller is taking on more risk, which is reflected in the rate • **Subprime mortgage rates** (what you'd get with bad credit from a bank) are often 8-12% PLUS fees • **Owner financing has no origination fees**, no points, no PMI — so the effective cost is often lower • **You can refinance later** when your credit improves to get a lower rate Always ask about the interest rate upfront and understand your total cost over the life of the loan.

One of the biggest advantages of owner financing is the simplified closing process: 1. **Find your property** and agree on terms (price, down payment, interest rate, monthly payment) 2. **Sign a purchase agreement** outlining all terms 3. **Make your down payment** — usually via cashier's check or wire transfer 4. **Close with a title company or attorney** — they handle the deed transfer and documentation 5. **Receive the keys** — you're a homeowner! Unlike traditional mortgages, there's no appraisal requirement, no underwriting, no waiting for bank approval. Closings can happen in as little as 3-7 days.

Owner financing is safe when done correctly. Here's how to protect yourself: • **Always use a title company or real estate attorney** — never skip this step • **Get title insurance** — protects you from liens or claims against the property • **Insist on a recorded deed** — you should be on title, not the seller • **Review the promissory note carefully** — understand the interest rate, payment schedule, and any penalties • **Get everything in writing** — verbal agreements don't count • **Verify property taxes are current** — ask for proof • **Consider a due-on-sale clause** — protects you if the seller's existing mortgage is called We work with reputable sellers and recommend using professionals for every transaction.

Many buyers use owner financing as a bridge to conventional financing. Here's how that works: • After 12-24 months of on-time payments, your credit score may have improved enough to qualify for a traditional mortgage • You can refinance the owner financed loan with a bank mortgage, potentially at a lower interest rate • The refinancing pays off the seller's note, and you continue making payments to the bank instead • This strategy lets you build equity and credit simultaneously We recommend checking your credit score annually and talking to a mortgage broker about refinancing options.