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\n <\/div>\n \n Step one: Talk to an expert!<\/h3>\n
Selling your house soon? Connect with a top agent near you to get an expert opinion on how much your house will sell for, what to fix before listing, and the latest local housing market trends.<\/p>\n \n
DISCLAIMER:<\/strong> This article is meant for educational purposes only and is not intended to be construed as financial, tax, or legal advice. HomeLight always encourages you to reach out to an advisor regarding your own situation.<\/em><\/p>\n Also known as seller financing<\/a> or a purchase-money mortgage<\/a>, owner financing is an arrangement where the homebuyer borrows some or all of the money to purchase the house from the current homeowner.<\/p>\n In some cases, this occurs because the buyer doesn\u2019t want \u2014 or can\u2019t qualify for \u2014 a traditional mortgage from a traditional lender.<\/p>\n In other cases, the seller lends the buyer an amount that\u2019s in addition to their traditional mortgage to make up the difference between the amount approved by the bank and the agreed upon price of the house.<\/p>\n For example, let\u2019s say the accepted offer between the buyer and seller is $300,000. The buyer has 20%, or $60,000, to put down on the house, but their mortgage company only approves a loan of $200,000. With seller financing, the seller can lend the buyer the additional $40,000 needed to make up the difference.<\/p>\n However, seller financing isn\u2019t generally expected to be a long-term arrangement. It\u2019s typically a short-term solution until the buyer can arrange a traditional loan for the full mortgage amount \u2014 typically within a few years.<\/p>\n Since that\u2019s the case, the terms of these loans are often designed to motivate the buyer to seek out alternative financing. For instance, the terms may include significant annual interest rate increases, or a balloon payment <\/a>scheduled for only a few years into the loan.<\/p>\n The good news is that, although this setup is a private mortgage loan<\/a> between two individuals, it is a legally binding contract with specific terms, conditions, and requirements that both parties must follow \u2014 and it includes recourse if those terms are not met.<\/p>\n The bad news is that it\u2019s a private loan between two individuals. If you\u2019ve ever had issues lending money to family or friends, it\u2019s understandable for a seller to feel uneasy about extending a larger sum to someone they don\u2019t know.<\/p>\n \u201cSeller financing can go really well if you\u2019re dealing with financially solvent people who have good jobs and are honest,\u201d says Edie Waters<\/a>, a top-selling agent in Kansas City, Missouri<\/a>, who\u2019s sold over 74% more single-family homes than her peers.<\/p>\n \u201cThat\u2019s the biggest risk the seller takes: \u2018Is this person honest? Are they going to abide by the terms of the loan?\u2019\u201d<\/p>\n","protected":false},"excerpt":{"rendered":" Believe it or not, there are homesellers who offer to loan buyers the money to purchase their property: it\u2019s called owner financing (aka seller financing).<\/p>\n","protected":false},"author":37,"featured_media":47045,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"cybocfi_hide_featured_image":"","footnotes":""},"categories":[343,322],"tags":[],"class_list":["post-10050","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-finances","category-logistics"],"acf":[],"yoast_head":"\nWhat is owner financing?<\/h2>\n