Owner Financing

Purchasing a home is often the largest single investment a person ever makes. Most homeowners rely on some form of financing due to the cost involved with purchasing real estate, such as traditional bank financing or owner financing. Owner financing allows home buyers to finance the purchase directly through the seller and does not involve conventional mortgage lenders or banks. The Houston owner finance attorneys at Guerra | Days Law Group are here to assist you from beginning to end.

Buyer’s Obligations and How Owner Financing Works

In owner financing, the seller doesn’t hand over any money to the buyer as a mortgage lender would. Instead, the seller extends enough credit to the buyer to cover the purchase price of the home and then the buyer makes regular payments until the amount is paid in full.

To secure the buyer’s obligation, the seller will require the buyer to sign a promissory note to the seller. Promissory notes not only secure the buyer’s obligation to pay the seller, but also delineate the terms of the loan, including the interest rate, repayment schedule and the consequences of default.

In most cases, the buyer obtains title to the property once the proper documentation is complete. In Texas, a buyer obtains title to the property once the seller executes a form of Deed wherein the buyer is listed as grantee of the property in question.

Whether you need us to prepare owner finance documentations from scratch or review documents the other party has already provided, Guerra | Days’ Houston owner finance attorneys are here to assist you every step of the way.

Advantages of Owner Financing

Owner financing can be a good option for both parties in a real estate transaction:

Advantages for Buyers

• Faster closing: No waiting for the bank loan officer, underwriter and legal department to process and approve the application.
• Cheaper closing: No bank fees or appraisal costs.
• Flexible down payment: No bank or government-required minimums.
• A good option for buyers who are not able to secure a mortgage.

Advantages for Sellers

• Can sell “as is”: Potential to sell without making costly repairs that traditional lenders might require.
• A good investment: Potential to earn better rates on the money you raised from selling your home than you would from investing that sum other ways.
• Lump-sum option: The promissory note can be sold to an investor, providing you with a lump-sum payment right away.
• Retain title: If the buyer defaults, you keep the down payment, any money that was paid, plus the house.
• Sell faster: Potential to sell and close faster since buyers avoid the mortgage process.

Just as there are advantages in owner finance, there are some disadvantages purchasers and sellers need to be aware of. Do not hesitate to contact a Houston owner financing attorney Guerra | Days Law Group to answer any questions as well as drafting the appropriate documentation.

Visit us on our other owner finance website for more information: Owner Financing ETC

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