thank you very much! looks like i will do regular financing from fha or conventional but this is really nice of you to have put the time into.

Hi Robert,

Great question!

Okay depends on the type of owner financing, but I'm going to assume you mean the owner will hold the mortgage and you'll make your monthly payments to him/her. That's sometimes a great solution - especially for you as a buyer if you cover a couple of bases. This will likely be much better for you than traditional institutional financing, assuming the seller is reasonable and serious about doing it. Here's why:

1) Reduced closing costs. Since the seller is the bank in this scenario, most of the traditional junk fees and costs of financing are eliminated. For example, there's no reason you should be paying points, application fees, etc. You may save 2-3% of the loan amount that you otherwise would have to pay to the lender.

2) There's no difficult underwriting. If you can convince the seller that you're creditworthy, you can avoid jumping through all the hoops a lender might set up for you.

3) You can negotiate an attractive interest rate - or at least try to.

4) You can generally close much quicker, assuming you and the seller want to.

5) No mortgage insurance requirement if your down payment is less than 20%

6) If you have difficulties in the future, a seller may be easier to work with than a bank.


You should still, however, cover a couple of bases and expect that the seller will require some convincing of your creditworthiness. Your bases include:

1) Consider getting an appraisal to make sure you're not overpaying. There's no requirement for this, as the bank is already convinced of the value (the seller's the bank here)

2) Also, a title insurance policy protecting you (mortgagor, not lender/seller/mortgagee) is a must.

3) The title insurance policy will necessitate a title search, which you absolutely want to have done to make sure that they own the property and can sell this property free of risky title clouds.

4) A new survey to ensure there are no encroachments on your property.

5) Make sure you have representation - By your zip code it appears that you're in Queens, so a good real estate transaction attorney is a must for you to have (they are not generally too expensive).

6) A home inspection and termite/wood-destroying insect inspection are very good ideas.

7) Make sure you know what institutional rates you'd be looking at so you don't get ripped off by the seller.

8) Hopefully, there's a good agent involved. But since you're asking this question here, there may not be.


For the seller, the considerations are very different, so I won't go into those here (because you're the buyer). Feel free to contact me directly if I can help.

Sincerely,
Diallo J. Stevens

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