How owner financing works in Houston
Owner financing – also known as seller financing – has become a popular financing option for buying a home in Houston as banks are becoming stricter with their mortgage underwriting norms. Lenders require a stellar credit score, fixed monthly income and good financial history when approving home loan applications. As a result even those people who are disciplined with money find it extremely difficult to obtain a home loan. Most of them pay a heavy price for small financial mistakes that they committed in the past.
On the contrary, you don’t necessarily need a good credit score in an owner financing arrangement. In fact, you can buy a home with no credit check or income verification.
What is owner financing?
It is a financing arrangement in which the seller agrees to accept installment payments directly from the buyer rather than having the buyer obtain a loan from a bank.
In other words, the seller extends financing to the buyer. If the buyer doesn’t pay the installments on time or become delinquent, the seller can foreclosure just like a bank does in a similar situation.
The buyer and the seller enter into an agreement and are bound by the terms outlined in a document, legally called promissory note.
The promissory note specifies important terms and conditions that the buyer and the seller need to abide by. Some of these terms include:
- Your monthly installment amount including principal and interest.
- Monthly payment due date.
- Whether the mortgage is fixed rate or adjustable rate
- Amortization period (the length of time to pay off the loan)
- Balloon payment (if any)
- Pre-payment penalties
- If refinancing is possible or not.
Another important document in an owner financing arrangement is the deed of trust. It basically specifies consequences of your failure to pay off the loan.
Through this document that is recorded at the public records office after the closing, you pledge the property as collateral to secure owner financing from the seller. The third party trustee who holds the deed of trust can sell the property at public auction if you fail to keep up with your payments and become delinquent.
When do you need owner financing?
There are circumstances when getting a home loan from a conventional lender is not possible. Some of these circumstances include:
- You don’t have a good credit score
- You are self-employed and don’t make a fixed income
- The lender can’t verify your income
- You are a foreign national
- You are a victim of identity theft
- you already have a lot of investment mortgages and have topped out what you can borrow
While you may not be able to get a loan from a bank, owner financing enables you to buy a home with no credit check or income verification due to flexible qualification criteria.
Whether you need to show your credit or income in an owner financing arrangement depends on your negotiations with the seller. Here at Shop Owner Finance, we help buyers to obtain owner financing without credit check or income verification. Since owner financing contracts are highly customizable, you and the seller can negotiate on pretty much everything. It includes, but is not limited to:
- balloon payment,
- amortization period,
- credit check,
- loan-to-income ratio,
- interest rate,
- down payment amount,
- monthly installment amount
- Penalties for late payment
- Consequences of non-payment
- Whether you can refinance or note
For example, Shop Owner Finance as a real estate brokerage helps buyers purchase home with flexible terms including:
- No credit check and income verification
- You can pay off the loan in up to 30 years
- You can refinance any time without paying any pre-payment penalties
- You can get owner financing even if you are self-employed or a foreign national
How owner financing works in Houston?
Your first step is to find a home that seller is willing to owner financing.
There are many ways you can find an owner financed home.
- You can hire a realtor
- You can go through For Sale by Owner listings and talk to their owners
- You can go through listings on free property listings websites online
- You can tour neighborhoods where you are planning to buy homes and negotiate with sellers individually.
Here at Shop Owner Finance, we can help you buy any home you want with owner financing in Houston.
We match you up with an investor who buys the home on your behalf and owner finances it to you immediately.
You are also assigned a realtor who helps you find your dream, negotiates on your behalf, prepares a contract and gets you through the closing process, at no additional cost to you.
Everything works just like it does when you buy with a conventional mortgage.
It is different from typical owner financing arrangements where balloon payments, pre-payment penalties and other similar restrictions are standard practice.
Besides you won’t be able to buy any home you want because most sellers like to get all the cash up front on the closing day.
Owner/seller financing is a great option for buying a home in Houston, particularly if you are struggling to get a conventional mortgage.
Want to know more about how owner financing works in Houston? Check our FAQ page. You can also visit our Testimonials page to know how some of our clients fulfilled their homeownership dream with owner financing.