Owner Finance
What is owner financing?
Owner financing means purchasing a home and getting a loan from the owner instead of going through a bank. Surprisingly enough, about 1/3 of all persons seeking to purchase a home cannot qualify for financing through a bank. The banks have strict rules, ratios, and restrictions that are designed to eliminate the risk of default. As a result, many people do not qualify and end up renting for most of their lives. However, banks will give lower interest rates for those that qualify.
What is Owner Financing? to see the list of homes available for purchase with Owner Financing through Great Offer Home Buyers
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How does it work?
The hardest part is finding a home that you like and that the owner is willing to give you a mortgage. You can find these in the MLS as well as "for sale by owner" websites. The description will clearly indicate if they will carry the note. You can also find a real estate investment company such as Great Offer Home Buyers that specializes in this type of transaction and choose from a portfolio of homes currently being offered. Great Offer Home Buyers will also look for a house that matches your description and notify you when we find it.
After you find a house that you like and an owner that will finance it for you, the rest of the process is very similar to any other home purchase. You and the seller sign a purchase agreement, and then you must still qualify for the loan through an underwriting process.
What does it cost?
Usually, these houses will be priced so that the mortgage payment would be very similar to the rent payment. If you would normally expect to rent that same house for $900 per month, the mortgage payment plus insurance and taxes would equal roughly the same amount. So why rent a house for $900 per month when you could own that house and make it your own?
How do I qualify for owner financing?
To qualify for owner financing with Great Offer Home Buyers, you will need a down payment of 10% of the purchase price plus a credit score of 550 or higher. You must also have a clean rental or payment history for the previous 24 months. Anybody with a recent eviction or foreclosure will not be eligible. If you do not have the full down payment, you may be a candidate for Rent to Own.
Rent to Own
Rent to own is a popular purchasing strategy for people that need extra time to save up down payment money or need some time to improve their credit scores so that they can eventually qualify for a loan, either through a bank or through owner financing. The buyer would sign a lease that allows them to occupy the property for a specific set of time in order for them to work on saving money for the down payment and improving their credit scores. At Great Offer Home Buyers, we normally prefer a lease that is 24 months long. A longer time frame for the lease may be available in specific cases. While in the property, the buyer pays the monthly rent and also pays for any maintenance expenses and repairs that come up while they are in the property. At the end of the 24-month lease, the buyer would then have the option to purchase the property at a price and loan terms that were pre-determined before they moved into the property. Typically, a down payment is also required upfront for this strategy. At Great Offer Home Buyers, the required down payment for rent to own is 5% of the purchase price. If a buyer does not have the 5% down payment, an additional down payment will be required to be paid each month until the buyer reaches 5%. The rent that is paid each month does NOT get credited toward the down payment. It is simply rent. Any money paid each month in ADDITION to the rent is credited toward the down payment requirement.
Rent to Owner Finance
This is the rent-to-own and owner finance combined. After the rent-to-own period, the buyer will get the mortgage from the owner and make payments to the owner instead of the bank. In this case, Great Offer Home Buyers, LLC would be the owner and the bank.
