Owner Will Carry
Owner will carry financing is a unique and creative way to finance real estate transactions. Oftentimes referred to as seller carry back or owner financing, the Seller finances a portion or the entire amount of the purchase price. When owner will carry financing is implemented, the buyer usually provides a small down payment to the seller. This amount is generally three to five percent of the purchase price.
Owner will carry financing is becoming quite popular due to the current credit crisis. Owner financing provides benefits to both buyer and seller. Sellers offering seller carry back financing open the doors to more potential buyers. Since many people are unable to obtain traditional mortgage notes, seller carry back financing provides them with the opportunity to own property without obtaining a loan.
In instances where the Seller finances a portion of the selling price, the buyer must obtain a mortgage loan for the balance. Mortgage lenders are more apt to approve mortgage loans when the purchase price is significantly below market value.
Owner will carry financing agreements generally last between three and five years. This allows the buyer to clean up their credit and establish a decent FICO score. Borrowers' credit worthiness is based on FICO scores. The higher the credit score, the lower rate of interest. Individuals with FICO scores under 600 pay a much higher rate than people with a FICO score of 700.
Many sellers will report payment history to the three major credit reporting agencies. However, individuals engaged in seller carry back financing would be wise to make their payments through their personal checking account. If the seller does not report payments, the buyer has documentation to prove their ability to pay the note.
Real estate investors can take advantage of owner will carry financing to purchase multiple properties. Currently, banks have placed a cap on the number of mortgage loans one person can obtain. Investors that have reached their mortgage note limit can purchase additional properties by seeking out sellers who will finance the entire purchase price.
Owner will carry financing should be backed by a promissory note which includes the purchase price, down payment, interest rate, monthly payment amount, and end date for financing.
If you own property and need to sell it, consider offering owner will carry financing. By executing proper legal documents, you can keep your property safe while earning a profit during the terms of the agreement.
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