What are the Benefits of Owner Financing for Buyers and Sellers?
If you look at the statistics recently released by the National Association of Realtors, you may believe that the housing market is looking up. According to information released in January, the housing affordability index was at its highest level ever. It came in at 206 which means that average families have twice the amount needed, in terms of income, to buy a house. This is assuming that a 20% down payment is made and 25% of the income will go to a mortgage. They also believe that the index will remain at this level for the rest of the year.
What does that mean for real estate marketing though?
Will homes start to sell now that families can afford them? Not necessarily. If a bank is not willing to loan the money for a mortgage, you may not be able to buy or sell. What do you do when this is the case? Why not turn to owner financing?
If an owner is willing to finance his or her home, both parties can get a great deal. What are the advantages of going this route and why are so many turning to this form of creative real estate investing? There are advantages for the buyer, the seller and both parties so you may wish to finance your new home this way, and if you are a real estate professional seeking to understand how to buy and sell houses in this tough economy, then this article will provide the answers to questions that you may have about owner financing.
Owner Financing Advantages for the Buyer
When you have poor credit, you will likely not be able to obtain a mortgage through a traditional lender. If you are looking into real estate investing for beginners, will find that an owner may be willing to front you the money to purchase their home. There is more flexibility when it comes to the down payment, your credit history and debt to income ratios. You won’t have to put as much toward underwriting fees, points, origination fees and things of that nature either.
Owner Financing Advantages for the Seller
When you choose to finance a property you are trying to sell, you will find that closing takes less time as there is less red tape involved. Owner financed properties tend to bring in more potential buyers and these properties tend to sell at a faster rate than those properties which require traditional financing. You may also obtain more for your home when you go this route and you earn income from the interest. Why let the bank make this profit when it can go into your pocket instead if you offer owner financing? There are very few risks when you choose to finance your property as the home and land serve as collateral and may be taken back if the payments are not made as agreed.
Advantages for Both Parties When Owner Financing is Offered
When owner financing is used for the buying and selling of a property, more money may go to the down payment. This benefits the buyer in that he or she owes less overall so the payments will be lower. For the seller, less credit will have to be extended and therefore he or she will be able to lower their own lending level.
Consider the above when determining if this option is right for you. Before you go this route, it is best to get real estate education, consult a real estate attorney and an escrow firm to ensure everything is in place and issues do not arise in the future. You want this transaction to go as smoothly as possible so each party can move on with life.
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