What is Owner Financing?? – Fridays with Fred

What Is Owner Financing?

Are you planning on buying a home in Irvine or elsewhere in Southern California? During the process of your home search, you may encounter one or more homes for sale which are listed as being “owner financed”.

Owner financed means that the owner has paid their mortgage on the home and has the ability to “be the bank” because they can sell the home to you themselves with you making your payments directly to them instead of a banking institution.

A Real-Life Example of Owner Financing

Let’s say that you’ve found a home that you want to purchase and it costs $500,000 but you are unable to purchase the home since you cannot qualify for a mortgage loan, but you have 20% saved ($100,000) for a down payment on the house.

In this case, you will contact the seller directly and tell them that you want to buy their home, are willing to put down 20%, and would like them to sell the home to you via owner financing where they will “carry the own note”.

How Owner Financing Benefits Both Parties

Depending upon the situation of the buyer and seller, owner financing can indeed benefit both parties because using the example above, the owner can sell their $500,000 home and get the $100,000 cash right away while agreeing to carry the note for 15 to 30 years at a specified interest rate.

Owner financing can seem complicated but the reality is that it’s an effective transaction that can benefit both the buyer and seller, especially if the seller will only need 5 years or less to fix their credit before they can qualify for financing, get a mortgage loan, cash the seller out and then finance the home for another 30 years.

Contact the Fred Sed Group

Are you interested in learning more about owner financing or are you ready to search for homes in Southern California? Contact the Fred Sed Group by calling us at (800) 921-9231 or connect with us online.