Loan Qualification and Owner Finance Alternatives

If you are house hunting, you probably know you will need to get pre-approved  for a mortgage if you are planning to get a bank loan.  It is harder than ever to qualify.  New rules on mortgages under Dodd-Frank act just went into effect on 10 January 2014.

You should order your credit report beforehand yourself, to check for mistakes/fraud, fix errors.(Ref @Redfin

Home loans from a bank are still hard to qualify for and approval takes quite a while, adding inconvenience, stress and delay for both seller and buyer.

As an alternative to a traditional bank loan,  you can ask the seller for Owner Financing. Find an agent who can handle this.  Some are unaware of the possibility.  Some have had special training in this alternative financing approach.

Mutual Benefit

There are several ways to structure such a sale and the promissory note that will provide benefits to both buyer and seller.  This can be negotiated and concluded in a short time and closing can happen much more quickly.  The home sells fast, the new owner can move in quickly, and all that stress and uncertainty is avoided.

Only a small proportion (estimates are 14-20%) of applications for a bank mortgage loan are actually approved.  The pre-approval letter the bank gives you actually in no way obligates the bank to provide your loan.

This presents a hurdle of time and extra cost and money for the buyer, but the seller also risks loss, because the house is off the market while awaiting this approval, when they could be receiving other offers.

You may benefit from Owner Financing on fully remodeled homes offered by investors.  This is their business – they renew homes, and fill a gap in the market that banks and the government cannot.  Often these sellers will offer Owner Finance loans.

This is especially helpful for buyers with no credit history, but with cash for a good down payment and good jobs or income.

Personal, Custom Service

Self-employed persons also have difficulty meeting traditional income requirements for a bank loan.  A more personal private seller like the investor can take into account your total financial picture, and customize Owner Finance offers.  Investors are able to  make creative adjustments in their approaches.

Credit Building They also commonly offer Credit Building services, and may able to improve or build your credit by the way they report on your mortgage payments.  Ask the seller about these extra benefits.  With this approach you can move towards a Refinance loan at more favorable terms and easier qualification than an original bank mortgage loan.

Texas Home Strategies is an Affordable Housing Provider.
We work to match up buyers and sellers for mutual benefit.
We Buy Homes and Close Quickly.
We assist sellers who have trouble selling their home,
and we work with buyers who cannot qualify for a bank loan.

How Can we help you?

Originally posted 27 November 2013
Updated 30 January 2014

About Orville

I am involved in Real Estate, buying houses that need work, and assisting home owners under financial pressure, and helping buyers who cannot get a bank loan, working with other Real Estate professionals to find solutions to problems.
This entry was posted in Topics. Bookmark the permalink.