Seller financing, or, what is frequently referred to owner financed homes is a way that lets a purchaser make payments to the seller in an attempt to build up enough of a down payment and prove financial stability, that they may then buy the home, either from the seller on a payment schedual or by then taking out a mortgage loan to pay for the property. Full or long term seller financing is hard to find because the owners would rather have full payout as opposed to taking their cash over time. As you prepare to sign an owner financed contract, make sure you have leagal help with the paperwork and make sure you know your money is being used properly. You must be sure of any leans or loans on the house because if the seller still needs to make underlying payments you may lose everything if they default.

With standard financing, the buyer may not qualify for a loan. With lease to own homes it’s easier, in most cases to qualify, than it is for a traditional loan if you’ve cannot afford a down payment.

Not having to qualify for a loan is one of the best advantages for owner financed homes. This is especially good for those who can’t qualify for a standard bank loan. Since you are working with a person rather than a traditional company, you have a better chance of getting better terms. For the seller, this type of financing allows them the leverage of demanding special terms due to the obvious advantage of the buyer avoiding a financial institution. Interest rates are either profit for the owner, if the purchaser backs out, or a down payment if they buy.

The only real concern is if the purchaser can make the monthly payments. This is only a small problem if the seller has spent time drawing up detailed paperwork with the professional approval of a lawyer or real estate broker. If the buyer defaults then the seller can foreclose on the house, taking it back as payment. The consequence for the purchaser is that often interest rates are higher on seller financed houses than on traditionally financed houses.