Beat the Bank by Using Owner Financing Instead
Is there a sign of hope in today's real estate market?
Banks have their hands full with home foreclosures across the country. Lenders continue to spend valuable time and resources in tracking, resolving and managing foreclosed home inventories that are larger than they have ever seen before. Few banks are promoting new mortgage loans in today's market. Large down payments and stellar credit ratings are required for the lucky few who can qualify for traditional home loan financing.
Real estate agents are also struggling. As banks make it difficult for buyers to obtain financing, fewer home buyers are able to hire agents. Similarly, traditional home sellers, unable to lure qualified buyers are letting their selling agent contracts expire as their houses remain unsold.
The bright spot for today's homebuyer has emerged with For Sale By Owner homes featuring Owner Financing. By purchasing homes directly from an owner seller, and taking advantage of available owner financing, buyers are finding a way to avoid the banks. These buyers are now avoiding the same banks that continue to ignore a large part of today's homebuyer population.
Owners that offer financing are the best hope for many would be home buyers today. Owner financed homes for sale offer flexibility in a few key ways:
a. Buyer credit ratings
b. Down payment
c. Monthly payment terms
Buyer Credit Ratings
Owners selling a home with owner financing available can be more flexible than banks when it comes to a buyer's credit ratings. Owner financed homes may be purchased by people with lower than average credit scores, although the seller may add a premium to the monthly payment to allow for this. This is not too unusual, as lower credit scores usually qualify for higher interest rates at traditional banks. But, with owner financing, the monthly payment may be negotiated with more flexibility than banks could provide. Paying a little extra per month on an affordable monthly payment is usually a small sacrifice for an owner financed home buyer to make.
Owner financed homes can offer various options when it comes to the down payment. Depending on the seller's and the buyer's situation, a low or no down payment option can be considered.
Monthly payment terms can also be customized more easily with an owner financed home. Extended payment timelines can help bring monthly amounts down to smaller amounts. Shorter payment timelines may either increase the monthly amount paid, or keep payments very low by adding a balloon payment due in the near future. In any event, the flexibility provided by owner financed homes can help buyers more easily meet the monthly terms that work best for their budget.