Houston owner financing contract: all you need to know

Are you buying and selling a home with owner financing in Houston? If your answer is yes, you should know that owner financing is a legal agreement between the buyer and the seller. Both the parties are legally bound by the terms that they’ve agreed to. These terms are specified in an owner financing contract.

This is what makes owner financing a legitimate ways of buying and selling homes in Houston without the involvement of a traditional lender. Since the deal is not being financed by a bank, the seller and buyer can be flexible and customize the terms to protect their individual interests.

Owner financing contracts in Houston?

An important thing to keep in mind is that real estate laws are state-specific. How owner financing contracts are drawn up in Texas will be different from how it’s done in other states. The Texas laws impose several restrictions on people selling home with owner financing (See also: 3 Houston owner financing laws you must know). You should be aware of these restrictions and other obligations when preparing an owner financing contract in Houston.

Downloading an owner financing contract template from the internet and using it for a deal is a common mistake many home sellers and buyers in Houston make.

Here at Shop Owner Finance, our team of qualified professionals help sellers and buyers to learn how to meet their legal and financial obligations in owner financing deals. We’ve mastered the process after using it in hundreds of deals over and over.

All the terms are specified in the promissory note and deed of trust in an owner financing deal.

The seller is required to disclose many types of information. Since the seller is extending credit to the buyer, the owner financing contract must specify:

  • Existing liens (if the seller is yet to pay off an existing mortgage, the bank may have the first lien),
  • type of loan (fixed rate or adjustable rate)
  • the interest rate (if it is a fixed-rate owner financing),
  • If it’s an adjustable rate loan, it must be specified how many initial years the interest rate will remain fixed (after entering into the owner financing contract), which widely used index will be followed to determine any change in the interest rate after the initial fixed-rate period,   
  • any information requested from the buyer with regard to his or her credit situation,
  • any pre-payment penalties
  • late payment penalties
  • Consequences of delinquency or non-payment

The seller should also provide the information with regard to the property’s condition, availability of water, sewer, and electric service, tax dues, details of insurance policies etc.

Owner financing contracts can be customized in many different ways and that’s what make it a great option for the sellers and credit-challenged home buyers. But this may also lead to many legal complicacies.  

If you are selling or buying a home with owner financing, make sure that you have professional help on your side to guide you through all your legal obligations.

Interested in learning more about our real estate brokerage services? Set an appointment today. A qualified realtor from Shop Owner Finance will get in touch with you promptly.

Araceli and her family relocated from California. Self-employed and unable to qualify for a loan, they used our program to get owner financing on a brand new home.
Referred by her loan officer, Rick, Barbara was able to finally get her dream home on the water in Galveston.
Aicha and her family purchased a brand new 5 bedroom home with owner financing and were so grateful to own a home even better than they thought was possible!

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