What is Owner Financing?


As a buyer, getting a mortgage can be difficult if your financial situation doesn't fit the banks ever changing standards and neat little boxes—a predictable salary that can be documented with paycheck stubs and W-2 forms, a stable employment history with no interruptions, and a great credit score.  In today's market getting approved for a loan is much harder than it was just a few years ago, many families are getting denied that could have been approved in the past.  Owner financing is just what it sounds like: instead of the buyer getting a loan from the bank, the person selling the house lends the buyer the money for their forever home.

The buyer and seller create a promissory note providing an interest rate, payment schedule, and an outline of the consequences for default. Instead of paying a bank each month, the buyer sends the monthly payments to the seller or a loan servicing company.  As with a traditional mortgage, the buyer is still responsible for paying property taxes and obtaining homeowners insurance.

Owner financing has many advantages for buyers:

1. The closing process can be faster.

There is no waiting for the bank loan officer, appraisers, inspections, underwriting, and legal department to clear the file - a process that easily stretches 45-60 days or longer.

2. Closing costs are lower.

Buyers love owner financing because they can get in the home for less money. They do not have to pay all the bank fees, survey, inspections, appraisal costs, and other various expenses.

3. The down payment amount can be extremely flexible.

Instead of having to meet a bank or government-mandated minimum, the down payment amount can be whatever the seller and buyer agree upon. This doesn’t mean that the seller will accept no money down but the terms are flexible depending on what works for both parties.

We would love to answer any questions you might have about owner financing or working with us to buy your next home. Feel free to email us at info@buyhousenobanks.com or call us at (888) 515-BHNB to speak with us personally.