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Advantages for the buyer in an Owner Financed Home purchase.

Despite the elevated purchase price and higher interest rate, there are many benefits to a buyer who engages in an installment sale transaction.

1. Easy Qualification. The buyer, in many cases, prefers an installment sale to conventional financing because it does not require traditional bank income and credit approval. The buyer may have poor credit because of a divorce or recent bankruptcy. He may be self-employed and cannot prove income. He may be new to his job and cannot meet strict lender guidelines.

Even if he could qualify for a loan, the rate will be astronomical if he has poor credit. Furthermore, few conventional lenders offer fixed interest rate loans to people with a poor credit rating.

As you can see, there are dozens of reasons why a buyer cannot (or will not) qualify for a conventional bank loan. The installment sale becomes the perfect solution for him.

2. Credit Rating. An installment sale may give the buyer a chance to improve his credit rating by owning a home and making payments timely.

3. No Loan Costs. One of the biggest benefits for the buyer is not having to pay the costs associated with conventional loans. Points, origination fees, underwriting charges, appraisal, credit reports, title insurance and the plethora of other “junk” fees charged by conventional lenders can amount to thousands of dollars at closing. The buyer is free from these with an owner-carry installment sale.

4. Fast Closing. A buyer can close and move into a property within days, since there is no third party lender holding up the transaction.

A wrap-around mortgage, more-commonly known as a “wrap”, is a form of Owner Financing for the purchase of real property. The seller extends to the buyer a junior mortgage which wraps around and exists in addition to any superior mortgages already secured by the property. Under a wrap, a seller accepts a secured promissory note from the buyer for the amount due on the underlying mortgage plus an amount up to the remaining purchase money balance.

The new purchaser makes monthly payments to the seller, who is then responsible for making the payments to the underlying mortgagee(s). Should the new purchaser default on those payments, the seller then has the right of foreclosure to recapture the subject property.

Because wraps are a form of Owner Financing, they have the effect of lowering the barriers to ownership of real property; they also can expedite the process of purchasing a home.

An example:

The seller, who has the original mortgage sells his home with the existing first mortgage in place and a second mortgage which he “carries back” from the buyer. The mortgage he takes from the buyer is for the amount of the first mortgage plus a negotiated amount less than or up to the sales price, minus any down payment and closing costs. The monthly payments are made by the buyer to the seller, who then continues to pay the first mortgage with the proceeds. When the buyer either sells or refinances the property, all mortgages are paid off in full, with the seller entitled to the difference in the payoff of the wrap and any underlying loan payoffs.

Typically, the seller also charges a spread. For example, a seller may have a mortgage at 6% and sell the property at a rate of 7% on a wraparound mortgage. He then would be making a 1% spread on the payments each month (roughly, anyway. The difference in principal amounts and amortization schedules will affect the actual spread made).

As title is actually transferred from seller to buyer, wraparound mortgage transactions will violate the due-on-sale clause of the underlying mortgage, if such a clause is present.

For more info, visit: http://www. greathomestexas. com

Qualifying for a home loan is the most common impediment to buying a house, which is why we offer the easy and fast Owner Financed home buying solution. Although, there comes a time when you will need to qualify through a bank to refinance your Owner Financed home. The Owner Finance specialists at Forte Properties help you with rebuilding your credit and will also give you the tools needed to do so. It is never too early to start! Here are some things you can do to prepare and give yourself the best chance of being able to refinance when the time comes.

1. Check your credit history. There are many sites you can go to and obtain your credit reports from all 3 credit bureaus such as FreeCreditReport. com. Look it over and see if there are any errors or out-of-date negative entries. If so, file a dispute form and get them removed before applying for a home loan. Are there any charge-offs or past-due accounts? If so, contact the lenders and try to make a deal to have those entries brought current or removed entirely. Again, do this before applying for a home loan.

2. Do you have several credit card accounts that are open? Close all but one account and wait for the closures to be reflected on your credit history. Only then should you apply for your home loan! Too much outstanding credit (or the potential to create it i. e. open accounts with $0 balances) is a huge red flag for mortgage lenders. Try to save up a down-payment of at least 20% of the amount you intend to borrow. The more you have available for the down-payment, the easier it will be to qualify for a home loan and get the most favorable terms.

3. Be realistic when predicting the size of the home loan that you’ll qualify for taking into consideration your income, credit status, and the amount of your down-payment. If you try to buy “too much” house, you’ll likely end up being disappointed.

Conclusion: Preparing yourself to be able to refinance your Owner Financed home doesn’t have to be an impossible task. With a little preparation and patience, it will happen!

In owner financing, sellers provide short- or long-term mortgages to buyers, augmenting traditional lender financing or taking its place.

These sellers may be more apt to get an offer and close a deal quicker. The loan may yield interest and an income stream topping mortgage payments or investment interest rates, and there can be tax perks.

Offering financing carries risk. It takes good judgment to avoid the missteps big lenders made in the subprime debacle. Sellers should consult experts to help set up a loan and maybe a trust, handle documentation, keep records and file taxes. If you’re in the Austin area, i would highly suggest Forte Properties. They are the #1 Owner Finance specialists in Austin and surrounding areas.

Who needs seller financing? The list includes foreign buyers who may have trouble getting U. S. bank mortgages, and business owners or others who look cash-poor to a bank but have assets and income aplenty. Seller financing for luxury properties is especially in demand.

Sellers who finance can defer capital gains taxes for the period of the note and only pay income tax on the interest and principal income they get each year. Depending on how long a seller has held a home and the size of the down payment, he may not need to pay capital gains tax on that part of the transaction.
Rates And Costs

It can run a few hundred dollars for an attorney to review loan and sale papers. Usually the buyer pays.

Interest rates, amortization and note periods on these private loans are set by what the market will bear. Some undercut bank rates. Others get a premium. Usury laws make loans at unreasonable interest rates uncollectible, possibly illegal.
For more information on Owner Financing and how it can benefit both the buyer and the seller in today’s market, go to http://www. AustinOwnerFInancedHomes. com.

Forte Properties is Austin’s #1 Owner Finance company.

Owner financing is a viable option for home sellers considering the rising percentage of people in debt and credit scores dropping every day. An owner financed mortgage is used for many reasons and by many people. Knowing the best options is the first step to deciding whether this financing option is right for one’s situation.

The first thing to do is to become educated about exactly what owner financing is and what the process obligates the seller and buyer to perform. In brief, these home purchase options are financed by the seller of the property where the buyer pays the seller a mortgage instead of paying the bank. This would eliminate the need for waiting for the right person with the right credit to buy the property. This appeals to sellers that need to sell their property fast and are willing to do anything to accomplish a quick sell. This is not to say that this option is a desperate way to sell a property. On the contrary, participating in an owner financed mortgage may benefit both parties in a big way.

There are many things to think about and possibly many stipulations to put into place with the new owners of the property. It is very important to treat the new owners as owners and not as tenants. Just because they are paying the seller for the property, it does not give the seller the right to tell them how to maintain the property. Likewise, they should not depend on the seller for any sort of work or information concerning the house unless otherwise stated in the contract.

Choosing the route of financing a property for a potential buyer should be done with some serious prayer and patience. As the bill collector, the seller needs to be able to put their foot down if the mortgage does not get paid. Having an Owner Finance expert such as Forte Properties in Austin, TX involved with the planning of owner financed mortgage is definitely something to seriously consider. Imagine the worst case scenario and how the matter should be handled. Before getting involved with an owner financing in Austin, TX, do the homework and consult a company that specializes in Owner Financing.

http://www. GreatHomesTexas. com

http://AustinOwnerFinancedHomes. com