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Terri, Home Buyer in Maryland

With credit problems, what would be the advantage of traditional financing vs. owner financing? How does?

Asked by Terri, Maryland Tue Feb 24, 2009

owner financing help a buyer with bad credit? And does is this situation truly realistic? I live in Maryland and you don't see many owner financing properties.

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Answers

7
Good afternoon Terri,

Owner financing is a much better option for the owner than for you as the potential purchaser. My advice is to take the time to put your finances in order and improve your credit so that you can qualify for proper mortgage financing from a reputable Local Mortgage Banker.

Here's my advice for you based on my 23 years experience as a Mortgage Banker:

First, settle any outstanding debt. If you owe money on collection accounts, charge-offs and/or judgments, make payment arrangements and get these accounts paid promptly.

Next, begin rebuilding your credit. If you have current accounts with good payment histories, or even some previous late-payment-blemishes, make sure you continue to pay those accounts on time. If you do not have any existing credit accounts then you'll need to establish several in order to create a viable credit history.

I have found that CONSUMER ACTION is an excellent resource for objective advice on all things credit related. You'll find free and sincere advice on everything from settling collection accounts to rebuilding credit to building credit from scratch on their website. http://www.consumer-action.org/

Beware of anyone offering to "repair" your credit! The Federal Trade Commission issued a stern warning last year that such offers are scams. Find more from the FTC HERE: http://www.ftc.gov/bcp/edu/pubs/consumer/credit/cre13.shtm

The best way to buy a home is to have a decent credit history combined with sufficient Income and Assets for a home purchase.

The best way to have a decent credit history is to settle negative outstanding obligations and pay all your bills on time for at least two years.

Trevor Curran
NMLS #40140
0 votes Thank Flag Link Sat Aug 25, 2012
Hi Terri,

Owner financing is out there but it is rare and you will likely see it in "for sale by owner" properties that aren't as easily reached on line. Most sellers need to sell outright to move on to their next home. So it takes a specific type of owner who has the financial ability to take a chance on less than perfect credit.

However, sometimes that credit is a cue that you should be waiting to buy. Clearing up those issues and pursuing traditional financing will open up so many more options for you!
0 votes Thank Flag Link Sat Aug 25, 2012
You are assuming that seller financing is an option. Today, most sellers will check a buyer's credit just as the banks do. Furthermore, seller financing often requires an even bigger downpayment. Make sure selling financing is actually an option on any home your are interested in.
0 votes Thank Flag Link Mon Dec 5, 2011
Owner financing would be better, but what you seem to need is someone who could look over your finances to see if there is something that could be done about your credit problems. You may need to pay off some credit cards, if that is part of your problem. Another pathway for you may be a lease option.
0 votes Thank Flag Link Mon Dec 5, 2011
Terri, I hate to say this to you, but owner financing may make your credit even worse because you probably will not be given any credit for making your mortgage payments (whether on-time or not) to the owner carrying the mortgage and you will not pay attention to repairing your credit, allowing it to get even worse. The best option for anyone with allegedly bad credit is the same as if you have a life-threatening illness...go to the doctor. In your case, go to a credit doctor...a trustworthy loan originator who knows how to get you well. Once you are "cured" of your affliction and come out of "rehab" you can resume your quest for a home and get a even better house than you ever dreamed at a lower interest rate than owner financing. Very few owners have the financial standing to carry-back the entire mortgage. Usually there is an underlying mortgage which must be paid monthly out of the proceeds of your monthly payments to the owner. This is called a land installment contract, one of the most risky forms of home ownership. My advice to you is: "Don't take old problems to a new address". You might as well face the demons that haunt you now, before they multiply. Please feel free to call or email me.

Walter Joiner, Realtor Salesperson
Re/Max Professionals
6321 Greenbelt Road
College Park, MD 20740
Office: 301-474-2400
Fax: 202-683-6064
Cell: 202-390-4716
EMail: waltjoiner@msn.com
Website: http://www.2hdb.com/waltjoiner
0 votes Thank Flag Link Thu Mar 17, 2011
I don't really feel that it would help your credit.

You may want to instead consider getting a mortgage professional that can do a rapid rescore for you. It is fairly inexpensive (maybe $60) as well as fight some credit challenges that are on your credit score. There are professionals at this and then there are non-professionals.

Once your credit score has rebounded, may just take a couple of months, you may then be able to qualify for a FHA or VA (if you have been in the service) loan. The credit requirements are not extremely high. You will have a terrific interest rate and low down payment.. FHA requires 3 1/2 down towards your purchase. VA is a 100% financing. Also, in some areas there are Rural Housing Loans offering 100% financing. Please let me know if you would like a referral to a terrific mortgage broker. Thank you.

Please let me know if you have any other questions.

Warmly,
Stephanie LeFew
Tampa Florida Realtor Pro
813-624-3332 cell
813-991-1355 home office
http://www.TampaHomeBuy.com
0 votes Thank Flag Link Tue Feb 24, 2009
There are not many owner financing options out there. You are also correct in assuming it won't do much to improve your credit because most personal lenders don't report to the credit bureaus.

If you woud like I can give you the name of a lender who will be realistic with you about getting financing. He can also give you some practical advice about how to repair your credit scores. Contact me if you would like some referrals.

Marilyn
0 votes Thank Flag Link Tue Feb 24, 2009
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