Owner Financed Homes – Your Landlord Finances Your House

When you have to buy a house, the trouble that you go through to get the finances and loans or mortgages can be cumbersome. It can literally take the life out of you. The running up and down for documents, papers, application forms and filling application forms – it can be pretty tiring, annoying and certainly, time consuming.There are some exceptional cases though, where the owner provides you with the finance, known as owner financed homes. In cases like these, you could even have bad credit history and have the option to own a house at a later stage. Owner financed homes work like this – in case the buying party does not qualify for a loan for the entire amount of the house, the owner then finances the remainder of the amount or in some cases, the entire amount. The difference here is that the owner doesn’t give any money to the buying party, but the buyer has to repay the owner in installments, usually at a higher rate than banks and other sources of finance. This option is now popular, in a scenario of economic uncertainty, as it gives both the buyer and the seller some breathing space to organize their finances.The buyer will have to pay a higher rate of interest if he opts for owner financed homes. This may put the buyer in a spot, but at least, he will have time to recover financially while he pays off the debt. The bad part for the buyer is that in case of default, the owner will have the foreclosure rights and not the buyer. Owners who offer owner financed homes usually have their own terms and conditions, some may be favorable to the buyer and others may not be favorable to the buyer.Usually, seller financing is a short term agreement. That means that the term is usually not more than 5 years. Of course, there are cases where the owners or sellers offer up to 30 years financing. Usually, the buyer is required to make balloon payments within the first five years, and if he is not able to do so, he may have to go for conventional methods of getting a loan and then pay the owner. In which case, his debt will rise further.The owners have an option of getting the full payment (in case they do not want to keep collecting payments from the buyer) by a process called ‘note buying’. By doing this, the owner sells the note on the house to a financing company which will then start collecting the remaining part of the loan and gives the owner the full amount after charging him a fee. This works out well for both parties, but there are some cases where the buyer may suffer at the hands of the owner in case of default.