Owner Financing – How it works

Owner financing is usually offered by the seller to remove the need for a bank. Instead of the bank acting as an intermediary, the seller acts as the bank, holding and managing the mortgage. The seller has more autonomy over the structure of the deal. The transaction benefits both the on buying and orlando home and selling it reducing the bureaucracy that usually comes with working with a traditional financial institution. Luckily, As Is Now specializes in owner financing for sellers!

How it works

Owner financing works similarly to any other mortgage. A down payment is collected by the lender, and the remaining balance is financed. The seller’s down payment amount usually meets equity requirements while minimizing foreclosure risks.

Why do sellers choose owner financing?

We have noticed sellers choose owner financing for a number of reasons. It is expedient for them in most cases, helping them reduce their monthly obligations immediately. The closing process is much quicker with this type of arrangement. Sellers can choose from a range of different types of payment options. Typical arrangements can include a balloon payment, fixed-rate amortization, interest only, and less-than-interest only arrangements. It is possible to combine different aspects of the various payment option types to create the loan. Owner financing also broadens access to prospective buyers.

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Benefits for buyers

Where an owner may have to make a series of repairs before taking the home to the marketplace when working through a financial institution, they don’t have to do that when doing an owner financing deal. This lowers the out-of-pocket costs that come with selling a property for As Is Now customers. Government required down payments aren’t an issue in an owner financing real estate transaction.

Benefits for the seller

With As Is Now, sellers can typically enjoy lower closing costs when they find their respective properties, as there are fewer fees associated with this kind of arrangement. With no discount points to be paid by the lender or many of the administrative fees such as origination fees, sellers will generally save money on closing costs. Buyers can quickly move into the home, taking possession of it that much quicker. In the event of a default, the seller retains all payments, the property, and the down payment. A promissory note can be sold directly to a property investor.

>> Related Content: Selling To A Cash Investor

How does the typical owner financing deal work?

The person’s credit score is pulled in order to make sure that the person is able to make the monthly payments in addition to existing obligations. The arrangement consists of a down payment, usually well over 10 percent. The interest rate for this type of property usually falls between 250 and 300 points more than what the typical buyer would normally pay if using a traditional lending institution. There is an amortization rate that basically outlines the length of the repayment term where the home is completely paid off. There may be a balloon date in which the entire balance on the loan must be completely paid. The pay history documentation will also be required over the course of the loan. If the property is being sold by a company, there may be a personal guarantee required. If the property is being sold by an individual, such a guarantee may not be required.

Owner financing with As Is Now offers a quick means of selling a property to a person who may not qualify for traditional lending. In this type of arrangement, the person may find that they are able to close quickly and offer more competitive rates to the buyer. If the person can successfully execute the transaction, the individual stands to make a good profit on the transaction. Safeguards like higher than average down payments in place protect against risks like foreclosure.

Call As Is Now anytime to chat about your options (407) 505-4253.

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