What Is Owner Financing

Anita, Thank you for explaining that. Is owner financing actually different then lease with option to purchase or is basically the same? Cindy.

Yes Cindy they are completely different. Refer to the post I did on lease purchases for further info.

Speaking from my own personal experiences, I prefer this method best. It gives you flexibility, more negotiating room and the ability to meet the need of both buyer and seller using little or sometimes even no money down. There are lots of owners that may exchange the downpayment for the repairs the property needs. Just ask all they can say is no.

so how would you ask a seller to do owner financing, how would you convience him/her? How would they/you come up with the loan contract....I mean how do you start this process, what would be the steps?

D

The firsr step would be to make an offer... Do you want to sell your house or not??

I am still trying to get a handle on owner financing. I have heard about it before and remember seeing an ad in the paper by an owner selling his home willing to "carry the note." My question is this: When an owner agrees to finance all of the sale, are you are just paying the monthly mortgage for the sales price you agreed upon (w/ or w/o interest), directly to the seller, without any financial institutions involved? Did I understand that correctly? Now what about partial owner financing? You will take out a smaller loan for the house and then pay back the mortgage company and the seller monthly for what he personally financed, correct? And if the seller is not going to charge interest on what he financed for you- that is a way to end up paying less interest correct...overall?

A lot going on here.. seller financing can be set up anyway you and the seller agree on.

It can be a 1st mortgage.
It can be you taking over payments on the 1st mortgage and also making payments on a 2nd to the seller.
It can be wrapping the 1st.

Yes, you can negotiate whatever interest rate you want. But... per the IRS will still owe taxes on some minimum level of interest even if you agree to 0% financing ie the IRS will impute interest rate income to the seller. Im not sure what the current minimum interest rate it- 4 or 5% maybe.

D, all you need to do to see if the property owner is open to owner financing is feel him out, when i'm looking in the LOCAL NEWSPAPER for deals, circle ad's that stand out, meaning FLEXABLE OWNERS, look for owners that say: MOTIVATED,WILL ASSIST IN THE FINANCING,WILL PAY FOR CLOSING COSTS, these sellers will be the ones who are most likley to take back a mortgage, YOUR HERO,SULLY.

What I am having an issue with is ....ok the owner will do owner financing. Ok...how does he/she do it, is there a form they would use, where do they get it? Then after the form is filled out...then what...does it get filed...where?

I think it would be the agreement to purchase, Please excuse me if i am wrong but Anita could definately tell you.

OWNER FINANCING: it would work something like this, bought property for: $150,000, existing 1st mortgage of $56,000 and buyer is approved for $100,000, through a conventional lender, so, the 1st mortgage of $56,000 would be paid for and $44,000 would go to seller(equity), then, seller would take back a 2nd mortgage payable @ 25 years @ 6.5%= $2,130 month, now you & seller would both sign a PROMISSORY NOTE, & get it notarized, and i'm assuming you would file it with the county court house like a deed, SULLY.

hi everyone i was wandering what are the best part in the u.s.a that is good for investment.Thanks

best place to start is in your own area. That way you know the location and all the perks, hot spots, low spots and other things pertinent in helping you make sound choices for properties. My advice would be get a few deals under your belt in the area your most familiar with before you venture out and make deals far from home.

1. You make offer

2. Offer accepted

3. Purchase agreement signed by both parties specifying exact details of purchase such as amount of sale, interest, terms and any special provisions like repairs
in exchange for DP, or amount of dp etc...

4. Warranty Deed (Vendors Lien Deed) prepared and Promissory Note.

5. Transfer of title with title company with recording of lien by seller (same as mortgage company) and deed.

6. NEW Owner now has deed in his name, former owner now has lien (promissory note) on property with a quit claim deed on file in case of breach f contract or failure to pay by NEW Owner.

how do you accomplish step#4, like how do you go about getting a WARRANTY DEED?, and how do you TRANSFER the TITLE?, SULLY.

You need to talk with an escrow company and a title company, sometimes you can find both wrapped into one.

Hi anita, I have a question on this topic. If the new owner can't purchase my home say in 1 yr or 2 yrs and they don't fullfill their end of the deal, then is all money made, mine without oweing any $ back to the people. Also is it feasible to just go for a one yr contract term or do most do 2 yrs or can i go with 1 yr?

If you are going to owner finance the property you should have the escrow company hold an executed quit claim deed on file in case of default. You have to write in the Purchase agreement that all monies paid on property are non-refundable in case of default on buyers end and they are also responsible for any additional fees related to default. That way you keep all monies paid and you protect yourself from having to pay any fees that may come up due to their default in getting the property transferred back to you.

Cindy,

As part 2 of your question, it's best when YOU own the home and are going to offer L/O you want it short as possible, typically I would go 1 yr, of course all the items Anita mentioned in the contracts as well as a heftier downpayment since it's not a "rental unit". I structure the L/O offers with usually a $3000 down, plus monthly "rent", i have in the contract all monies are non-refundable in case of default and you HAVE to have a Quit Claim deed filed with an escrow company, that assures you're protected both on property and money.

If you are going to be the Leasee on another persons property you'd want to be sure subletting the property is in the contract and that you can refurb the property, as well as hold a longer term before executing the purchase, such as 2-3yrs.

need to negotiate some type of rent credit in the lease, or else your money that your paying every month goes towards nothing, i would try to negotiate a 50% rent credit, SULLY.

Okay i am wanting to not so much lease option for someone, but would rather owner finance that way i would be asking 5% down on 235,000 with a rate of 8% so that i could get the most for the deal which would be 11,750 up front. Whichever way to make the most up front is important to me. Any advice from all of you is always appreciated. Thanks

I was going to try to make an additional 200.00 a month for profit on my mortgage as extra income per month. Now i am undecided on which one to do. I would like some votes to help me out! Anyone have any replies. What is best, 11,750 for owner financing up front or a lesser amount for lease purchase. Both have advantages of steady monthly income. anybody can reply or PM me. Just interested in having some input, advice, maybe some of you have had a bad experience, please let me know. I am all ears.

Thank you for helping me. That certainly all makes perfect sense. Thanks again

.

If you are asking for a % DOWN then you are not doing a lease option you are doing an actual lease purchase. There IS A DIFFERENCE. With the lease option they lease for a year or maybe two and exercise their right to purchase at the end of that time either by conventional means or owner finance. For that year, you only get regular rental rate no overages. You dont get a down payment you get a DEPOSIT same as on a rental, which is what it is for that first year or so, until they exercise the option.

If you do a lease purchase - THEN you get the 5% down and the extra 200-300 per month on top top of the monthly rate this goes toward the purchase price and you are financing it this way until it is paid off or they come up with other financing to buy it out.

** Mind you, some people do a mix of both so it really is up to you how you want to work it.

Either way you are going to come out good. If you have someone that wants to give you 11,000 dollars for owner finance great. You may want to consider at what interest rate you are going to owner finance or lease option at.

For example if you carry a note a 6% and the people you are going to lease purchase to dont have that great of credit because they may have just lost a house in an arm or divorce whatever may have happened to them,remember alot of these people are good people that just went thru something bad and need some time to get their credit or finances together.

My point to you is that knowing this and knowing they cant go to a bank and get a loan why not charge them a down payment for your 6% loan thats non-refundable cash in your pocket. And this is for both of your strategies. But along with that depending on which strategy you choose to go with why not charge them 1 point or more the difference and do the math and see how much more positive cash flow that will give you. You will be suprised.

That I asked one of my old coaches... Lease Option vs. Lease Purchase what's the difference?
His reply:
They are the same thing. In rare cases with a Lease Purchase the Buyer agrees to buy; however, those Lease Purchase Contracts have a way out, thus making it effectively a Lease Option even in those cases. So both terms are interchangeable (as is rent-to-own). An Option is a right to buy but not an obligation. But an Option should contain a set price.

The term 'lease purchase' is the abbreviated way of saying 'lease with option to purchase,' thus a lease purchase and lease option are exactly the same thing.

If someone talks about a lease purchase where the tenant is forced to buy at the end of the lease, they are talking about a type of arrangement that does not have a term invented for it yet. It is definitely not called a lease purchase.

Hope this clears it up for you Elena!

I was speaking of the difference between a lease with option to buy and a owner finance. Which one is best. sorry if i confused you.

I think they are different according to the posts.

Well, I thought about it so much I got a headache, then I thought I would ask the mentor who taught me about it if he could clarify for me. I still have the headache, but at least I know the difference now.... LOL!