Today it is possible to get an owner finance home loan with quite poor credit. With FHA for example, you can get a loan with a credit score in the low 600s.
Still, there are some Americans whose credit is too poor or their documented income is too low to qualify for financing. Are you out of luck then?
Not necessarily. Another option is to ask the property owner to finance it for you. This is referred to as owner home financing or seller financing. This is a way to buy a home that is becoming more common after the mortgage meltdown of 2009, after millions of people lost their homes and ruined their credit.
If you ask the seller if they will finance the home to you, it is unlikely they will say yes. Very few homeowners understand what owner financing is. You may need to explain what owner financing is to them and your proposed terms.
But some home owners may be open to owner financing home loans because they cannot get their home sold at the price they want or need.
If you are interested in buying a home with owner financing, below is more information.
Owner financing is very similar to a traditional bank mortgage. The only difference is 'the bank' in this case is the homeowner. They allow you to buy the home from them on terms, and it could be very similar to a traditional mortgage.
Normally, you would need to put down at least 10% to finance the home from the owner. You might set up the loan for 20 or 30 years at a fixed rate of interest.
You will usually need to pay a higher interest rate than a bank mortgage because this is a higher risk for the homeowner. But an owner finance deal can still be a good way to get into a home if you cannot get a regular mortgage at the moment.
If you are seriously considering owner financing a property, you should keep these tips and guidelines in mind:
Buying a home with owner financing is an acceptable way to get into a home if you are paying a fair interest rate and are paying roughly market value for the home.
The most important thing to remember is that you are paying a higher interest rate on the mortgage. You will want to refinance the loan as soon as you can so you can pay a regular interest rate. So get your credit in order within a year or two and refinance.
If you follow the tips and guidelines above to owner finance a property, you should be able to work out a fair deal that works well for both sides.
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