Finding owner financed homes in Houston, TX: Complete guide

finding owner financed home Houston TX guide

Owner financing - also known as seller financing - is a great financing option for credit challenged home buyers. However, the biggest challenge prospective buyers looking to buy a home with owner financing in Houston TX face is that their options are limited. It is extremely difficult to find homes that the sellers are willing to owner finance.

Most sellers are wary of owner financing and for good reasons. They would not trust a buyer with poor or non-existent credit. Moreover they would want to get full proceeds from the sale up front instead of getting a monthly installment like a bank. Regular sellers are not in the business of lending money.

Here at Shop Owner Finance, we help credit-challenged people buy ANY home they want with owner financing in Houston or anywhere in Texas. Before reading future, you can explore all the listings in Houston TX below and fill up the contact form on the listing page. A licensed realtor will promptly get in touch with you and help you buy your dream home without credit check or income verification.

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Before we discuss how we make it possible for our clients to buy any home they want with owner financing, let’s talk about some traditional ways of finding an owner financed home in Huston or anywhere else for that matter:

Real estate professionals and MLS

You can hire real estate agents specializing in neighborhoods where you are planning to buy a home. They can contact sellers individually and ask them whether they would consider selling with owner financing. They can also go through the area’s multiple listing service (MLS) to check if someone has listed a home with an owner financing option.   

Listing search

There are many property listing sites where you can search for owner financed homes in Houston free of costs. These listing sites are publically accessible unlike MLS, so you can easily conduct a search from the comfort of your home.

FSBO and distressed sellers

Another option is to contact sellers who have listed their homes without hiring a real estate agent. These listings are called For Sale By Owner (FSBO). It will be easier for you to negotiate with FSBO sellers about an owner financing arrangement. You can also contact distressed sellers who are hard pressed to get their property off their hands.

These are some of the most common tips that can help you find an owner financed home in Houston. However you may not be able to buy any home you want using these options. You may find a seller that is willing to owner finance, but you may not like the home up for sale or vice-versa.

The best option to find owner financed homes

If you have saved enough for a down payment and are looking to buy a home with owner financing, our system is your best option.

Our clients can buy any home they want with owner financing.

Wondering how?

Well, an investor from our network buys the home on your behalf in the traditional way and owner finances it to you.

The process is almost similar to the one involved in buying with a mortgage.

You can search for a home on our website by clicking here and request more information. Alternatively, you can set an appointment. We will assign a real estate agent at no additional cost to you. The agent will help you find your dream home, negotiate with sellers and navigate your way through all the legal and financial formalities. We have a very easy-to-follow rubberstamp process.

Some misconceptions about owner financing in Houston

Should you give up your homeownership dream if you can’t get approved for a conventional mortgage? Are there any alternatives to a home loan? When people in Houston TX facing credit challenges have their mortgage applications turned down by banks, they desperately try to find the answers to these two questions.

The good news is that you don’t need to give up your dream of owning a home and there are alternatives to a conventional mortgage.

As an alternative financing method, owner financing is getting very popular among credit-challenged home buyers, but since it’s not a mainstream financing option, buyers have many misconceptions about it.

Some of the misconceptions about owner financing in Houston TX are:

  • You can’t buy any home you want with owner financing. The reality is that you can buy any home you want with owner financing. We will explain in this guide how this is possible.
  • Like a conventional mortgage, owner financing also needs credit check or income verification. The answer is – not necessarily.
  • You can buy a home with owner financing even if you are not financially disciplined. The fact that you don’t need credit check or income verification doesn’t mean you don’t need to be financially disciplined when buying a home with owner financing. For example, you may be asked to make large down payment. We will discuss in this guide what you need to qualify for seller financing in Houston or any other Texas city.

We will try to answer all the questions we are frequently asked when we work with credit challenged home buyers in this complete guide to seller financing in Houston TX. If you want to learn specifically about our real estate brokerage services for credit-challenged home buyers, you can visit our FAQ page. This guide aims at explaining to you all the important aspects of owner financing in general.

Why do banks turn down mortgage applications?

An increasing number of mortgage applications are being turned down by conventional lenders and as a result, many people in America are struggling to get on the property ladder.

But why do conventional lenders reject mortgage applications when they are in the business of lending money?

A high rejection rate is despite the fact that a mortgage is a secured loan. It is protected by collateral. You pledge the home as collateral when you take out a mortgage. The bank can repossess the property if you don’t keep up with your monthly payments.

The reason for banks rejecting mortgage applications is that they are not in the business of buying and selling real estate. If a borrower defaults, the bank has to sell the property to get it off their books.

The banks also have to follow certain underwriting rules - some of which are government-imposed, while others are their own. When a mortgage applicant doesn’t meet the qualifications specified under these underwriting rules, banks don’t approve his or her application.

Here are some common reasons for mortgage rejections:

  • You don’t have a good credit score. According to experts, a minimum credit score of 620 or more is required to get a mortgage from conventional lenders. To the get the best interest rate and terms, you require a credit score of 720 or more. We recently wrote an article on credit score required for buying a home in Houston TX.
  • You don’t have a large down payment. You should typically put 20 percent of the purchase price down. You can get a home with a lower down payment, but you will need to pay a private mortgage insurance (PMI) on top of your monthly instalment. It’s an additional financial burden that you can avoid by making a down payment of 20 percent or more. We wrote an article on down payment required for buying a home in Houston.
  • You are self-employed and don’t have a stable income. Lenders need to verify your income in order to come up with a loan-to-income (LTI) ratio. Read this article to know more about how self-employment can become a hurdle if you are in the Houston housing market looking for a home.
  • You have a history of foreclosure, short sale or bankruptcy. It causes your credit score to drop. You will find it almost impossible to get approved for a mortgage for at least seven years, say experts. We explained in a recent article how foreclosure, short sale or bankruptcy can prevent you from buying a home with a conventional mortgage.
  • If you are a foreign national, you will find it very difficult to obtain a mortgage because you don’t have a credit history in the U.S. Even if you do, the paperwork is very cumbersome.
  • You are a victim of identity theft.

Not being able to get approved for a mortgage can be very disappointing for people aspiring to become homeowners. A small financial mistake committed in the past damages your credit score and may come to haunt you when you are planning to buy a home. Missing a few credit card payments is all it takes to make this happen.

But what most people don’t know is that they can buy a home without a bank loan. As already mentioned, there are many options and owner financing is one of the best ones.

What is owner financing and how it works in Houston?

Seller financing is similar to a conventional mortgage in many ways.

You pledge your home as collateral in an owner financing arrangement, just like you do when you buy with a conventional mortgage. You need to make a down payment and also pay a monthly installment including a principal amount and interest.

So what’s the difference?

The major difference is that you get credit from the seller rather than a bank in an owner financing arrangement. The seller becomes the lender and extends credit to you.

Another difference is that most banks follow standard underwriting norms or eligibility criteria for approving a mortgage application. On the other hand, there are no standard eligibility criteria for getting approved for owner financing. Most of the terms and conditions in an owner financing arrangement are negotiable. Nothing is set in stone.

You and the seller draw up a customized financing plan on the negotiation table. This makes seller financing a great alternative to a conventional mortgage.

Let’s discuss some of the terms and conditions that are customizable in seller financing:

Down payment

The seller may ask you to put a specific percentage of the purchase price down. In most owner financing arrangement, you are asked to make a large down payment.

It protects seller in case you default. Like with a conventional mortgage, you lose your down payment if you become delinquent. For example, our clients are asked to make a down payment of anywhere between 15 percent and 20 percent.

Credit score requirement

The seller usually agrees not to take into account your credit score. It is for this reason that you can buy with owner financing even if you can’t qualify for a conventional mortgage.

As already mentioned, you need to have a good credit score to obtain a mortgage from a conventional lender.

Income verification

You don’t necessarily need to have your income verified to obtain seller financing. This makes it possible for self-employed professionals to buy a home in an owner financing arrangement.

Since self-employed professionals don’t make a fixed amount of money, it becomes difficult for them to prove their income. As already mentioned, conventional lenders reject their mortgage application on this ground.

It makes owner financing a perfect choice for self-employed professionals.

Balloon payment

A balloon payment within the first five years of the loan is a standard practice in seller financing in Houston. The buyer needs to pay a one-time large payment in additional to the monthly payments.

The word balloon refers to the fact that the payment is large and has ballooned in comparison to the other payments.

It is negotiable if you need to make a balloon payment. If you agree to make a balloon payment, you and the seller can negotiate how much it would be.

When we help our clients buy with owner financing, they don’t need to make a balloon payment. In our system, the loan is amortized over thirty years.

Interest rate and repayment plan

These are also negotiable. Sellers usually charge a slightly higher interest rate than what a conventional lender does.

The interest rate determines the amount of your monthly payments and the length of the loan. You can also negotiate many other aspects of the repayment plan. You can negotiate whether it would be a fixed rate or variable rate loan. For example our clients get a fixed-rate mortgage for 30 years.


Most people buy with owner financing when they can’t qualify for a conventional mortgage.

But what if your credit score improves after a few years and a bank is ready to approve your mortgage application?

It can be specified in the owner financing agreement whether you can refinance with a conventional bank or not. If the contract – also known as promissory note – allows you to refinance, if there would be any pre-payment penalties can also be specified.  


What if you don’t pay your installments on time?

A bank would impose a penalty. The same thing happens in an owner financing arrangement.

The financial and legal consequences of late payments and non-payment of the loan can be specified in the financing contract.

Being delinquent on your payments may lead to foreclosure just like it does when you default on a mortgage.

Our clients make their monthly payments through a note servicing company.

The company is responsible for collecting payments from the buyer every month and depositing it in the bank account of the investor who owner financed the home.

Important documents in seller financing

While the process is similar to that involved in buying with a conventional mortgage, you should be aware of the two most important documents that you sign in the owner financing arrangement:

Promissory note

It’s a legally binding document that outlines all the financing terms and conditions that you must follow during the entire term of the loan.

It specifies following terms:

  • How much is the credit amount?
  • The amount of your monthly installment including principal and interest
  • Down payment
  • Amortization period
  • What is the type of your loan – fixed rate or variable
  • Whether you need to make a balloon payment or not
  • What will be the interest rate
  • What will be the repayment schedule
  • A due-on-sale clause. If applicable, you need to pay off your debt when you resell the house.

You should pay a very close attention to this document because these terms and conditions will dictate everything about the repayment plan. And as already explained most financing terms are customizable, so you should make sure that the terms in the promissory note aligns with your home buying goals.

Deed of trust

This document defines the consequences of delinquency. If you don’t pay off your debt or keep up with your monthly installments, you will face penalties or foreclosure as specified in this document.  So this document outlines:

  • Penalties for late payment
  • Consequences of non-payment

The pros and cons of seller financing in Houston TX

Like any other type of loan, there are certain advantages and disadvantages of buying with owner financing in Houston or anywhere else for that matter. You must be aware of both so that you can determine if owner financing is the right choice in your situation:

Advantages of seller financing in Houston

Following are some advantages of buying with seller financing:

No need for credit check or income verification: This financing option is particularly suitable for you if you are unable to get approved for a mortgage due to credit challenges, foreign nationality or self-employment. In an owner financing arrangement, there is no need for credit check or income verification.

Customizable terms: We have already discussed this in detail. When you take out a mortgage, you have to agree to specific underwriting norms, but most of the terms are negotiable in an owner financing arrangement. You can negotiate with the seller and have the terms that they are suitable to your particular situation.

Rebuild credit: Owner financing can help you rebuild credit. If you are payments are reported to the credit bureaus, your credit score will improve. You can refinance with a conventional lender when your credit score is good enough.

Some other advantages of seller financing include faster closing, no hidden charges and comparatively fewer legal and financial formalities.

Disadvantages of seller financing

Following are some disadvantages of buying with owner financing:

Limited options: It is very difficult to find people who are willing to sell their home with owner financing. They would want all their money up front.

However, it’s very easy to find a way around this problem. You can buy any home you want with Shop Owner Finance. Read on to know how we make this possible.

Higher interest rate: The seller will charge a slightly higher interest rate than what a conventional lender does.

However the additional amount you pay compared to a conventional mortgage is so insignificant that you will hardly notice the difference.  

Legal hurdles: If the home you want to buy with owner financing has an existing lien on its title (for example the seller bought the home with a mortgage, but is yet to pay it off), there will many additional legal and financial formalities which could be cumbersome to navigate through.

These formalities become a big hurdle if the seller is bound by a due-on-sale clause. The seller needs to pay off the existing loan to clear the title when he or she sells the property. And since the seller is not getting all the money up front, the bank which has a lien on the property’s tile may not allow him or her to sell.

Our clients don’t directly buy from the seller. The sellers get their money up front from an investor in our network. The investor then owner finances the home to our client. So the due-on-clause doesn’t get in the way. 

Watch our clients explaining how we helped them fulfil their homeownreship dream:

Owner Financing Testimonials

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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