Posted: Sun May 07, 2006 8:58 pm Post subject: RE:
Hi,
I don't think going for owner financing can affect your credit history if you have been regular in paying your previous loans. Your credit history can only get affected when you don't make the monthly payments in time and in full amount for the cash amount you have borrowed through owner financing.
Posted: Mon May 08, 2006 3:16 pm Post subject: Owner Financing - Is It Legal?!
Sharon,
Owner financing of a home purchase where the private owner agrees to accept monthly payments toward the pay-off of the agreed upon purchase price is perfectly legal ... but caution should be used as a borrower.
Such financing cannot "hurt" a credit history when (as in most cases) the credit is never reported to the traditional credit bureaus. Therein lies one of the many problems with owner financing - a buyer/borrower that makes long-term, on-time private mortgage payments may never receive the expected traditional positive credit for their efforts.
That being said - there are other critical issues that both a Buyer and Seller must consider prior to entering into a private mortgage transaction.
A home purchase that involves owner financing should include a Contract for Deed (otherwise known as a Land Contract) purchase agreement. This is where the Buyer agrees to purchase the home at an agreed upon sale price and down payment. The Buyer then makes monthly payments to the Seller with a stipulated term, rate of interest and date of final payment where the Contract for Deed must be paid in full.
A Buyer under a Contract for Deed has fewer rights than a Buyer who has obtained a traditional mortgage loan. A homebuyer should always consult a local/reputable real estate attorney before signing any Contract for Deed.
Most Contracts for Deed sales require only a small down payment. The Buyer agrees to pay the Seller or the Seller's real estate agency the total sales price plus an amount for interest monthly over a period of years. Only after the final payment, will the buyer receive a deed and full ownership.
Some common and important questions regarding a Contract for Deed:
Should the contract for deed be in writing?
A buyer must get a written contract which is signed by both Buyer and Seller that has all the terms agreed to. Without a written contract, the Buyer will not be able to enforce the agreement if the Seller refuses to perform his or her part of the agreement.
Should I record the contract?
Even if the contract states it cannot be recorded, every Contract for Deed should be recorded in the county in which the property is located as soon as possible in order to protect the Buyer's interest.
Should I have the home appraised? YES. Otherwise you may be buying a property for more than it is worth.
Who is responsible for repairs? The Buyer of the home is generally responsible for making all repairs after the sale of the property. The Seller may be required to repair certain problems in the home that existed before the purchase date if:
1. The Seller has agreed to make the repairs; or
2. The Seller knew about the defects from city inspections and does not tell the Buyer; or
3. The Seller is guilty of fraud or misrepresentation.
Fraud and Misrepresentation:If the Seller of a home makes statements about the condition of the home which are untrue in order to convince the Buyer to purchase the home, the Buyer may be able to cancel the contract or force the Seller to repair certain defects. A Buyer should always make sure that the Seller's statements about the condition of the house are included in the written contract.
Who is responsible for real estate taxes and homeowner's insurance? The Buyer of a home must generally pay for real estate taxes and homeowner's insurance on the property after the sale is closed. Sometimes the Seller owes back taxes. The Buyer should check to see if any back taxes are owed. If there are unpaid back taxes, the Contract for Deed should say who will pay them.
The Buyer should make sure who will receive the real estate tax bills and homeowner's insurance bills and make sure that these are paid when due.
If the Buyer is paying the real estate taxes and homeowner's insurance by an escrow account, the monthly payments to the account will increase each year, as costs increase.
How can I prevent the loss of my home?
A Buyer who receives a notice of foreclosure or a court summons should contact an attorney as soon as possible.
If a Buyer, under a Contract for Deed, fails to make the payments required by the contract, the Seller can declare an end to the contract and bring a court action to evict the Buyer from the house. The Seller will send, by mail, a written 30-day notice of ending the contract before the court case. Generally speaking, if the Buyer owes less than three-fourths of the purchase price, the court must allow the Buyer at least 60 days and may allow up to 180 days to pay the Seller the amount needed to bring the contract current. If the Buyer pays the required amount within this period, he or she will get contract rights back and he or she will be able to keep the house. Even if the Buyer owes more than three-fourths of the purchase price, the court may give up to 60 days to pay the amount and restore the contact rights.
How do I become the owner of my home?
As the homebuyer, you must pay the balance owed to seller in order to receive the Deed to the property. This is usually accomplished by refinancing the Contract for Deed into a traditional mortgage.
As a general rule, the Buyer will be able to refinance a Contract for Deed into a traditional mortgage after the Contract for Deed has been recorded for 12 months. Buyers need to be sure that the original Contract for Deed allows enough time for final payment, especially if time will be needed to correct credit issues or any other issues that prevented the Buyer from obtaining a traditional mortgage at the original time of purchase.
I hope this helps! _________________ Bill Clanton is a Mortgage Specialist and Manager of State Street Mortgage of Illinois. StateStreetMortgage.Net
janet herrera Guest
Posted: Sun Jan 13, 2008 6:15 pm Post subject: owner finance
Owner financing is legal and will not hurt your credit score. The payment history will not reflect on the credit report but that will not affect your credit. _________________ Lisa Scherzer
Allpointe Mortgage
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john white Guest
Posted: Tue Oct 07, 2008 11:40 am Post subject: owner financing
How interest to charge for financing a house
BruceA Guest
Posted: Wed Oct 08, 2008 2:39 pm Post subject: Contract Deed ( owner financing )
ok, the down payment is paid and you have agreed on the purchase price. What about the balance of the Sellers mortgage with the mortgage company(oweing a balance on the selling property). Will the mortgage company let the seller, sale, contract the property thats not paid for yet ????
charlotte Guest
Posted: Wed Oct 08, 2008 5:55 pm Post subject: interest charges
Do you have to have the interest included on the contract of sale?
I do not think that the mortgage lender will allow the seller to go for a sale or contract of the property. The lenders can even take severe action against the seller.
Thanks,
Jerry
greenelcipsegt Guest
Posted: Sun Mar 01, 2009 7:55 pm Post subject:
what would happen if i were to walk away from our owner finance? would i get sued? I really need to know cause we are short on money due to both our hours being cut.
It the seller wants he can definitely sue you if you do not make the payments. However, it will also depend upon your owner financing agreement. Go through your owner financing agreement and check out what steps your seller can take if you fail to make payments. _________________ Procrastination is the enemy of your financial sucess
Donna R Guest
Posted: Tue Mar 17, 2009 4:27 pm Post subject: owner financing land
We have a five acre piece of land in NH. We have been asked if we will owner finance. How do we know how much interest to charge if we do decide to owner finance?
You can check out the market rates with some of the lenders of your area and then decide on the rates you are going to charge the buyers. However, as you are planning to owner finance, I would suggest you to go for an agreement with the buyer. You can contact an attorney and let him draft the agreement for you. The agreement will include all the important terms and conditions pertaining to the loan.
Posted: Tue Apr 07, 2009 11:13 am Post subject: Contract for Deed Foreclosure
Hi we bought a house 2 years ago on a contract for deed and fell behind on payments. We also learned the seller had defaulted in making the payments - we received notice of sheriff's foreclosure sale. While we were behind in our contract payments, we paid sufficiently to keep the property from going into foreclosure (we met the seller's at-costs with the lender). The seller now claims he will seek a judgement against us for money's owned from the contract but I feel and have been told we can counter suit for failure to prevent the foreclosure.
I have a feeling we have a case against and to be honest just want this to go-away (both parties terminate). For his failure to prevent foreclosure, we would expect a suit against him for monies we invested. Just wondering what we may be liable for and if we do have a case against.
jerry
