It’s no secret that the lending guidelines have tightened up over the last few years. Even borrowers that would have been “well qualified” before the downturn…good credit, money down, stable income…are seeing some tougher standards these days. Many government insured loans now require the buyer to carry additional mortgage insurance if the down payment is less than 20%.
The National Association of REALTORS® reports that these tighter standards may be holding back at least 15% of the potential home buyers in the marketplace. That’s a substantial number.
To sidestep the tighter regulations and additional mortgage insurance, some buyers are looking to an old concept: owner financing. Sure, there are additional precautions to be aware of, but using professionals versed in this arena can help make it a smooth and easy process.
Definition of Owner Financing
Benefits to sellers
Since owner financing appeals to a particular group of buyers that are motivated and may not be able to purchase elsewhere, typically a seller can command a higher sales price.
2) Shorter Time on Market
Offering owner financing can make you stand out from the crowd of listings. It’s something unique that will appeal to a particular set of buyers.
3) Monthly Income
Cash flow is positive and consistent, providing more stable income than leasing out the home.
4) Higher Interest Rate
Owner financing can have a higher interest rate than conventional mortgages or other investments.
5) Tax Breaks
The seller might pay less in taxes on an seller financed sale as they may be able to report less (see your CPA for advice).
Benefits to homebuyers
Even if the seller demands a credit report on the buyer, the seller’s interpretation of buyer qualifications are typically less stringent and more flexible than those imposed by conventional lenders.
2) Tailored Financing
Unlike conventional loans, sellers and buyers can choose from a variety of payment options such as interest only, fixed-rate amortization, less-than-interest or a balloon payment. Interest rates can adjust periodically or remain the same for the term of the loan. Consult a professional to determine what works best for your situation.
3) Lower Closing Costs
Without an institutional lender, there are no loan or discount points to pay. No origination fees, processing fees, administration fees or any of the other assorted miscellaneous fees that lenders routinely charge, which automatically saves money on buyer closing costs.
4) Down Payment Flexibility
Down payments can be negotiable. If a seller wants a larger down payment than the buyer possesses, sometimes sellers will let a buyer make periodic lump-sum payments toward a down payment.
5) Faster Possession
Because buyers and sellers aren’t waiting on a lender to process the financing, buyers can close faster and get buyer possession earlier over a conventional loan transaction.
To conclude, these transactions can be challenging but also rewarding given the right situation, but make sure you consult with trusted professionals before entering into an owner financing agreement.
FREE Home Buying Guide
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Let’s face it, life happens and plans change. I’ve seen more of my clients lately needing to adjust their housing situation, so I’ve designed a program that makes the process both easier and less costly. Whether you’ve outgrown your current home, or need to downsize to a smaller home, I can help.
How the Move Up Arizona Program Can Help
Save Thousands – Simply put, this program was designed to save the client money. When you choose Dan Mullarkey as your Realtor, the program will provide a commission discount on the sale of your home, and a rebate on the purchase of your new home. You will still receive the same 5 Star service as Dan’s clients have experienced along with the most comprehensive home marketing program available.
Less Stress – The Move Up Arizona Program can take some of the worry and anxiety off your plate. With the additional savings, you may decide to hire a team of professional movers, or do a few cosmetic fixes on the new home…or maybe just a well-deserved family vacation once you’re settled in.
Seamless Transition – As you can assume, real estate is about expecting the unexpected. When you are working with Dan, not only are you staying well informed on the progress of your move, but Dan’s experience also keeps you ahead of potential problems. From simultaneous closings to post-possession agreements, Dan’s your best ally against the real estate curveballs.
Qualifications For The Move Up Program
-Client is not currently represented by another Realtor on the sale of their home, or purchase of a new home.
-Dan Mullarkey will represent the client on the sale and purchase of their homes, per written agreement.
-If purchasing a new construction home, Dan Mullarkey must be present as representative on first community visit.
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