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Answers to Your Owner Financing Frequently Asked Questions

Posted by admin on July 16, 2023
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A red sign on a property that reads "for sale by owner."

If you’re looking to buy land for sale in Texas, figuring out financing can be the hardest part. If you don’t have good credit (or no credit at all), it can be extremely challenging to secure a traditional mortgage for the property you want. 

If you’ve been researching how to purchase land without a credit check, you may have run across owner financing.

Owner financing is exactly what it sounds like. Instead of seeking out financing from a traditional mortgage lender like a bank, you work out the terms directly with the current owner of the property. 

Ready to learn more? Here’s what you need to know.

What’s Included in an Owner Financing Contract?

An owner financing contract has a few common forms. You may have a rent-to-own agreement, a promissory note, or a deed of trust. Generally, they all include a few terms similar to other loans.

Generally, owner-financed contracts will include the following information: 

  • The length of the loan
  • How payments will be split up
  • Purchase price
  • Interest rate
  • Loan amount
  • Down payment
  • Penalties for late payments
  • Your monthly payment
  • Details about a balloon payment

Do Owner Financing Deals Require Credit Checks?

Owner financing is one of the best ways to buy land without a credit check. However, you will still need to be approved by the owner if you want to buy their land for sale in Texas. 

The seller and buyer will work together to determine the downpayment and other proofs of income to determine the specifics of the loan contract. 

Are There Any Drawbacks To Owner Financing?

Like all other financing options, there are some risks you should consider. First, you will need to meet the seller’s requirements before they decide to offer a seller financing option to you. 

It’s important to note that interest rates also tend to be higher. The loan terms are also typically shorter, so you will have less time to pay off the full amount. Additionally, many owner financing contracts have balloon payments, which are large sums that will need to be paid off towards the end of the contract. 

Finally, the due-on-sale clause can quickly pop up. If there’s a mortgage already on the property, it will likely need to be paid in full before you can purchase the land. In some cases, you may be able to take over the mortgage, but this varies on the mortgage lender.

What Happens if I Default on an Owner Financing Contract?

Defaulting on your payments can bring a lot of legal troubles to you, including multiple lawsuits. The deed will return to the seller and you may face a foreclosure. 

The seller also typically has the option to evict you as well.

What Is a Balloon Payment? What Happens if I Can’t Pay It?

While you’re discussing the terms with the seller, you may negotiate a monthly payment that doesn’t cover the entirety of the loan amount within the allotted time to pay it back. 

To cover the final cost, you may have what is known as a balloon payment to finish paying off the remaining amount. If you can’t afford it out of pocket, you have a few options:

  • Pursue traditional financing like a mortgage or personal loan
  • Offer the property back to the original owner
  • Sell it on to cover your payment

Ready To Try Our Owner Financing Option To Buy Land With No Credit Check? Santa Cruz Properties Is Here for You!

If you want to buy land for sale with no credit check, you don’t need to look far. Our team here at Santa Cruz Properties has the experience you need to finally achieve your dream of owning land.

Ready to buy land with no credit check required? See our available properties and get started!

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