
When looking for a way to purchase a property without having to go the traditional route of securing a bank loan, you might want to consider owner financing options — also known as seller financing.
There are many reasons why it might make sense for you to seek out owner financing options, including: being unable to secure a traditional mortgage loan, a quicker closing process, fewer fees and additional costs, or simply a desire to avoid working with a lender institution.
Whatever the case might be, the good folks at Santa Cruz Properties would like to inform you about the basics of what owner financing is and how it works.
The Basics of Owner Financing
Owner financing essentially means that the property owner will take on the role of the bank or lending institution by financing a portion (or all) of the value of the property.
When reviewing seller/owner financing options, be advised that some can act more like rental agreements as opposed to traditional loans, and MIGHT offer unfavorable loan terms.
With that understanding, the following are common types of seller financing agreements:
- Land Contracts: a land contract is an agreement to purchase a piece of real estate.
- Assumable Mortgage: a type of financing in which buyers can purchase a home by assuming responsibility for the seller’s current mortgage.
- Lease Purchases: this is essentially a “rent-to-own” agreement.
- Land Loans: used to facilitate and finance the purchase of a piece of property at a later date.
- Holding Mortgages: A homeowner agrees to serve as a lender for the home buyer, providing the loan for the purchase.
Advantages of Seller Financing
The following are some very important advantages of seller financing over traditional financing options:
- Great for those buyers who are unable to pursue a traditional loan but with a means of purchasing property.
- The seller and buyer determine the parameters for the loan including: interest rates, payment schedule, and refinancing options. These would traditionally be taken care of by a bank or lending institution.
- Because the traditional process of applying for a loan through a bank or lending institution is removed, seller-financed loans can close quicker than traditional sales.
- Can produce a large capital gain in tax savings over the course of the term of the agreement.
- One can sell the promissory note to an investor if the situation calls for it.
The information provided above is only a basic overview of the differing types of owner financing options, as well as an overview of the benefits of this particular kind of financing arrangement.
A good rule of thumb is to involve the help of a legal or licensed professional to help you better understand the finer points of this arrangement — or one can contact a property specialist as well!
Owner Financed Property for Sale in Edinburg via Santa Cruz Properties
Now that the basics and advantages of seller financing have been explored, what’s next?
There are plenty of different pathways one can take, all of which will contain potential areas of confusion or frustrations. If this is the case, reach out to the wonderful staff of Santa Cruz Properties. Our experts will share their knowledge with you and help you better understand your owner financing options.
And if you’re ready to purchase your very own owner-financed property in Edinburg, take a look at the current properties we have available.