Owner Financing FAQs in Texas: What Buyers and Sellers Need to Know

Owner financing is a powerful tool in real estate, but it comes with its own set of legal, financial, and practical questions. Below are some of the most frequently asked questions we hear from clients at Guerra Days Law Group.

Is owner financing legal in Texas?

Yes, owner financing is legal in Texas, but it must comply with both Texas Property Code requirements and certain federal laws such as the Dodd-Frank Act. Depending on how many transactions you do and the type of property involved, you may need to use a licensed mortgage loan originator.

Can I owner-finance a property with an existing mortgage?

Yes, this is known as a wraparound mortgage. While it’s allowed in Texas, you must be very careful with the original mortgage’s “due-on-sale” clause. Legal structuring and disclosure are key to avoiding early foreclosure by the lender.

What happens if the buyer stops making payments?

That depends on how the documents were prepared. If a deed of trust was used, the seller may pursue foreclosure. In a poorly drafted contract or an unrecorded deal, enforcing the seller’s rights may be more complicated. That’s why properly documenting the transaction is essential.

Do I need a lawyer for an owner-financed deal?

Yes — both buyers and sellers benefit from legal guidance. A real estate attorney can ensure the deal is compliant, enforceable, and protects your long-term interests. Mistakes in owner-financed contracts can be costly to fix later.

Can owner financing include a balloon payment?

Yes. A balloon payment is a lump sum due at the end of the payment term. Texas law allows this structure, but it must be clearly disclosed to the buyer and included in the amortization schedule.

What is the difference between a contract for deed and a promissory note?

A contract for deed delays the transfer of title until the final payment, while a promissory note with a deed of trust transfers title immediately and secures the debt with the property. The latter is generally preferred in Texas due to stronger buyer protections and easier enforcement for sellers.

Does the transaction need to be recorded with the county?

Yes, it’s strongly recommended. Recording the deed and deed of trust protects the parties and puts the public on notice of the sale and financing. It also helps avoid future title issues.

What if I’ve already signed an owner-financing deal and need help?

We assist clients with reviewing existing contracts, resolving disputes, and pursuing enforcement or defense strategies if problems arise. Don’t wait until the issue escalates — early legal advice can save time and money.

Ready to move forward? Contact Guerra Days Law Group today for legal help with any stage of your owner-financing transaction.