Owner Financing

As everyone knows, the market has continued to sink lower and lower. Home prices fell by 19% from Jan 2008 to Jan 2009 nationally. If you live in certain parts of Florida, your house may have lost more than half its value. Almost every area has had a downturn.

You know it's time for you to start looking to purchase. After all, you've been paying rent on time every month for years. And with the current home prices being so low, purchasing may make more financial sense then renting now.

However, that still doesn't mean a bank will qualify you. They have turned back to traditional lending norms. You need strong credit, 20% down and a stack of paperwork that's ten feet high to show you can afford the house. And for many of us, the American dream is still far away.

Or, you can start looking at another way of purchasing a home. Through owner held financing.

Even if you make enough money to purchase a home AND you have twenty percent down, you still may not be able to get a traditional mortgage from a bank if you:

Are self-employed and can't show proof of income.
Do not have enough work history for the banks lending standards.
Only have so-so credit.
Closing costs take the loan up too high.
Don't have the time to wait for a typical escrow period.

Without question, one of the best parts of owner held financing, for both parties, is they are free to determine whatever terms they wish to complete the transaction. Of course, all deals must meet state regulations and federal laws. And both parties should always retain an attorney to ensure the paperwork is correct and filed appropriately. Other benefits include:

Quick possession.
PMI insurance is usually not requested.
Little if any closing costs.
Down Payment can be negotiated to below bank standards.
The loans can be non-conventional, such as interest only or multi-year ARMS.
Qualifying documents are far less than what a bank would want..

Here are them most widely used types of carryback financing:

- Mortgage/deed of trust: The seller carries the mortgage and like a bank ,will charge interest. Sometimes the buyer has a portion of the mortgage with a bank, while the seller holds a second mortgage for the difference.

- Wrap-around Mortgages: Here you have both a bank mortgage, and a sellers mortgage. The first mortgage - the bank loan - is what the seller owes. The second mortgage literally "wraps around" the first mortgage, with the buyer paying the seller and the seller paying the bank from an escrow account.

There are several other techniques, but these are the most common. The link below to www.OwnerCarryIt.com really outlines all of the options with examples.

Make sure you speak to an attorney before signing any documents. You must always protect yourself in financial transactions!!!

Owners can get a higher price than other houses in the neighborhood. Because the buyers don't have to qualify with the same bank restrictions (of course that's up to the seller), the value of the house will be higher in comparison to those around it.

More Buyers will be interested as most can't purchase under the current bank restrictions

You can charge a more than the going interest rate. Just make sure you look at federal and state laws so you are their guidelines.

The seller may pay have several tax advantages, as they may only have to show the income received, not the full sale price. Check with an accountant to see how this applies to you.

Monthly income from the loan.

Remember to protect yourself with a Quit Claim Deed that is attached to an escrow account. The buyer must put their monthly payment into the escrow account and if they don't, you need to have it set up so thtat the escrow officer files the Quit Claim Deed so the property goes back to you, the seller. That usually ensures the buyer pays on time.

A great article from About.com
Home Buying

Ehow.com has a number of good articles on Owner Financing.
How to sell your house using owner financing
How to buy an owner financed home
How Owner Financing Works

A site that has owner financed properties that is well laid out and is also very informative.
OwnerCarryIt