How does owner financing work?

not sure what you mean about your personal rent, wolves. can you elaborate?

I am currently owner financing my home as we speak. We drew up a contract in Word and it states how much they put down, how much they pay a month and after a year they can take the amount they paid that year off the price of the home and either borrow that amount and pay off the mortgage that I have on it OR they can continue to keep paying my mortgage til they can get better credit and afford their own loan to help their credit. They are friends of mine and I work with one of them so yes its scary and all but with the economy the way it is...I would rather make them happy and keep them in it then for them to find something else and I be stuck with it again. Its a beautiful BIG home but just not for me!!

Thanks and good luck everyone!!

-- snasteen

[Email address deleted as per forum rules]

i would love to know, snasteen, if you are responding to one of the other posts on here or it this is a wholly independent posting of your own. what you have to say doesn't seem to correlate with any of the other commentaries.

i have to say that what you've written about seems like a pretty good deal for the people buying your home are getting. one other thing you can do for them is to keep a record of how they are making payments so you can add to their credit reference pile, so to speak, when the time comes for them to go and get a mortgage.

Do you know what a typical down payment is on owner financing? 20, 30, 40, 50%?
Also, a typical loan term? 5, 10 15years??
Thank you!

loretta, since these loans are negotiated between an owner and a buyer, i don't believe you will find that there is a "typical" down payment or loan term. a lot depends on who the borrower is - in my mind, a sensible owner who contemplates financing a purchase for a buyer would require a credit report. that is clearly going to impact the negotiations.

If I sell my house with an owner finance, and the new owners default on the note and , leave the house in degraded condition or in another scenario, the house is destroyed by fire or such, where do I stand with the morgage?

Our contract (drawn up by an attorney) states they have to pay the taxes by January 31st. If not paid after 10 days, we can (and did) assess a late fee. We notified buyers full balance of taxes (less than $250) must be paid by March 19th or we will take further action. Buyers are promising not to pay until at least March 31st.

Buyers are demanding we show them our mortgage statement on the property because it it their "right" to see it. We pay our bills and our payment history, although perfect, is none of their business.

Is there free legal assistance that we can refer the buyers to? I want them to understand we are not the boogie men and aren't asking to be paid in a timely manner to be 'mean' to them.

Hi Mary,

Both you and the buyers are legally bound to follow the terms of the owner financing contract. If the contract clearly states that the buyers need to pay taxes by January 31st, they will have to pay it within the specific date. You can take action against them if they violate the terms of the contract. If required, talk to the attorney who prepared the contract.

Sorry to hijack, but if you did owner financing as a seller with the proper contract and agreements, would that home still be included in your debt to income if your trying to buy a new house? Will there be a timeline needed for the seller to show that payments are being made from the new buyers?

Reason I am asking is I am trying to sell my home currently and am wanting to buy a new one as well. I know I will run into problems with debt ratio for two mortgages. Thanks

Hi Marvin,

You will be able to go for a seller financing if your property is free and clear of any mortgage. So if your property is free and clear and if you did a seller financing, then the property will not be included while calculating your debt to income ratio.

Thanks

If owner finances do they usually do it for the entire time OR do they typically do it for a 2-3 year period with a clause that the buyer will then have to get a traditional mortgage, etc.?

welcome mitzi,

owner financing is normally done for 3-5 years and then the buyer will have to refinance the loan and pay off the seller.

What if the seller is at fault? I have made all of my payments on time, paid the current and past due taxes, filed and paid for the contract of deed, paid to have the utility lein taken off and he is still refusing to obey the contract? Is there something that I can do? I was told the 10% was high for an interest rate. I was told that the house appraised at $40,000, he sold it to me at $100,000 and I have to pay $2500.00 every tax time (not principal) plus a $5000 down payment. In 8 months I have spent close to $20,000. Does anyone know about unsophistic investor.... I feel like I am one. The sqft land is 0.28 acre the home is 1162 sqft

is owner financing and rent to own on the same order

Welcome yvonne,

Owner financing and rent to own are not the same. To know about owner financing, check out the given page:
http://www.mortgagefit.com/owner-financing.html

In case of the rent to own option, the owner rents the home with the condition that the property will be owned by the renter if the term of rent is finished, or if the lease can be converted to a sale.